INDEPENDENT PUBLICATION BY RACONTEUR.NET #0698 08/10/2020 FUTURE OF BANKING & CAPITAL INVESTMENT

OPEN BANKING BANK MODELS BREXIT FINTECH Distributed in 04 It was meant to revolutionise 05 Could you create a tier-1 bank 10 The UK's departure from the EU 12 With the Strategic Review UK finance, but the promised from scratch - and should you is imminent, so what will this pending, we look at fintech's transformation is yet to appear really try to? mean for the City of London? role in UK recovery Published in association with

CORONAVIRUS Society demands that Contributors

Stephanie Baxter Financial journalist for more than a decade, and formerly banks step up deputy personal finance editor at The Telegraph. She is currently a financial journalist Coronavirus has shaken the UK’s personal at Rhotic Media. finances and customers are calling on Liz Lumley Global specialist commentator on banks to play a role in economic recovery, FinTech for over 20 years. Currently, she is Director of FinTech at VC but how well placed are they to do so? Innovations, and architect of the FinTECHTalents Festivals.

Joe McGrath Joe McGrath Financial journalist and editorial director of Rhotic Media, with work published in Bloomberg, welve years on from the global lett. “They need to have a ‘human under- Financial Times, Dow Jones and T financial crisis, you might antici- standing’ approach. This means enabling Financial News. pate bankers have developed higher people to budget better, manage their bills levels of empathy with the British public. and maintain their mortgages.” Oliver Pickup After all, in 2008, it was the taxpayer who Despite this, those who have been work- Award-winning journalist, specialising in technology, business footed the bill for propping up fallen giants ing in partnership with the banks in recent and sport, and contributing to a such as Royal Bank of Scotland and Lloyds years say while attitudes within these organ- wide range of publications. Banking Group. isations have shifted – they do want to help In early-2020, as coronavirus started to – their systems and technologies have lim- Daniel Thomas wreak havoc on the UK economy, many were ited their ability to respond adequately to the Writer and editor, with work seeking payback. They wanted to see banks issues presented by the pandemic. published in The Telegraph, Newsweek, Fund Strategy and undertake a moral duty to support society EducationInvestor, among other and help industrial sectors that had been hit publications. by the pandemic. hit financially by COVID-19, but the speed of “The UK government bailed out the banks their response has been undermined by lack- Jonathan Weinberg to the tune of £500 billion in the 2008 finan- lustre digital innovation in the years leading Author and former national cial crisis. The UK taxpayer took the brunt of up to the pandemic. newspaper health editor and medical correspondent, he is a this and arguably is still paying for it today,” “At a time where customers have necessar- visiting lecturer at the University says Richard Skellett, founder of charity Digi- Banks have lost their way, ily embraced digital platforms and need per- “The entire ethos of the industry is predi- of Cambridge and University of tal Anthropology. sonalised, immediate and reliable services to cated on the assumption that analysis, and Westminster. “Despite this support, I would argue the starting with removing meet their unique and rapidly changing cir- modelling based on experience, are key suc- banks have little or no relationship with authority from bank cumstances, legacy systems that are inflexi- cess factors for a bank,” says Gouttebroze. their customers. Banks have lost their way, ble, expensive and inhibit innovation just no “This, by far, trumps innovation and change. Gretel, a company that specialises in reu- starting with removing authority from managers longer cut it,” he says. As a result, it tends to get caught and para- niting individuals with cash in accounts they bank managers.” Transformation must be a priority, but this lysed by unforeseen events.” have forgotten about, says one step would be The view that banks owe something to is easier said than done. “With customers Given the widespread criticism of the to raise awareness about the £50 billion in Publishing manager the British people has undoubtedly become needing support now and internal resources banks for not translating innovation into assets that is currently scattered throughout Reuben Howard more widespread over the past decade. Ben- “Banks have a generational opportunity to under pressure, transformations that have social action, it is easy to forget that three the financial services industry unclaimed. edict Ireland, head of experience at Splendid truly support customers through an unprece- historically been risky and take years are a years ago the Competition and Markets “Over 20 million people aren’t aware of the Managing editor Benjamin Chiou Unlimited, is among them. dented crisis, but years of inaction on creak- hard sell,” says Wilson. Authority outlined the Open Banking pro- dormant assets they have sitting in forgot- Having worked with HSBC extensively, he ing infrastructure is thwarting best inten- So why are banks so slow to embrace digital gramme. The project was designed to free ten accounts and investments,” says Dun- Associate editor believes the banks that have invested in dig- tions to protect lives and livelihoods,” says transformation? And has this lack of transfor- up the data held by banks to stimulate inno- can Stevens, the company’s chief executive. Peter Archer ital tools in the years leading up to the pan- from Simon Wilson, director of global pay- mation in the years prior to COVID-19 harmed vation, enhance competition and allow new “Imagine the impact if people could be reu- Deputy editor demic are ultimately those able to help the ments solutions at Icon Solutions, which has their ability to help society now? challengers into the market. It was also sup- nited with that money.” Francesca Cassidy most, particularly given the increased digi- been working with HSBC and Lloyds Banking Fabrice Gouttebroze, managing director of posed to lead to an explosion of new services. While there is a “moral imperative on tal migration of customers since the start of Group, among other well-known European Sirma Group’s S&G Technology Services, says There is some evidence that this has banks to support the global economy”, Ste- Digital content executive Taryn Brickner the outbreak. banking giants. the industry is “notoriously change averse” worked, however. Non-bank entities, vens says the requirement should be broader. “Banks should have a moral obligation to Wilson says the banks are doing everything because of its laser-like focus on trend analy- which compete with the legacy high street “The responsibility to support lies with all Production manager help customers cope financially,” says Skel- they can to support people who have been sis and modelling. banking cohort, have stepped up during financial services providers to make acces- Hannah Smallman

the pandemic, offering individuals and sibility to this money as quick and simple as Design businesses speedy access to loans, new possible in light of the financial impact of the Sara Gelfgren PUBLIC FEELING TOWARDS THEIR BANKS HAS YET TO RECOVER FULLY accounts and payment services. But, cru- pandemic,” he says. Kellie Jerrard cially, there has been limited help for those Colm McDermott UK adults were asked to rate the services they felt their primarily-used bank was especially good at, but results were underwhelming. with the greatest need. Samuele Motta “There has been no shortage of new Jack Woolrich Range of digital services money management and investment apps, (app, online banking etc.) 42% Art director but precious little for other business sectors Joanna Bird Security 41% or people who aren’t already affluent, sophis- Design director Personal service (including ticated investors,” says Sara Korchmaros, Tim Whitlock telephone, email) 28% chief commercial officer at retail technology platform Recash. 97% Quality of advice 25% “As a result, the original vision for Open of banks say the customer Although this publication is funded through advertising Range of financial products Banking – to extend the benefits to other sec- experience is a focus and sponsorship, all editorial is without bias and sponsored and insurance offers 23% features are clearly labelled. For an upcoming schedule, tors – has remained largely unfulfilled.” partnership inquiries or feedback, please call +44 (0)20 8616 While this assessment of Open Banking’s 7400 or e-mail [email protected]. Raconteur is a leading Transparency 22% publisher of special-interest content and research. Its pub- success may be justified, it does not tell the lications and articles cover a wide range of topics, including Terms and conditions business, finance, sustainability, healthcare, lifestyle and full story of innovation across the UK bank- technology. Raconteur special reports are published exclu- for keeping an account 21% ing sector more broadly. In reality, banks have sively in The Times and The Sunday Times as well as online at raconteur.net. The information contained in this publication Range of payment options been helping society in dozens of other ways. has been obtained from sources the Proprietors believe to 21% be correct. However, no legal liability can be accepted for any “There have been some great examples errors. No part of this publication may be reproduced with- Free-of-charge % out the prior consent of the Publisher. © Raconteur Media % of banks supporting their customers dur- cash, also abroad 19 69 ing the pandemic, offering multiple mort- of banking Lending conditions 10% gage holidays, removing overdraft fees, customers are keeping branches open and even provid- /raconteur.net None of the above 7% “nonpromoters” ing helplines to provide expert help,” says based on their Net @raconteur Kam Chana, product innovation director at Don’t know 11% Promoter Score @raconteur_london Temenos. “These are all valuable, but more Statista 2020 can be done.” SAP 2020 raconteur.net /future-banking-2020

ENERGISE YOUR BUSINESS £12 WITH OPEN BANKING £1,848 Find out how our API can transform your business

Account information services (AIS) Payment initiation services (PIS)

Data enrichment yts.yolt.com 2 FUTURE OF BANKING & CAPITAL INVESTMENT

Commercial feature REALISING OPEN BANKING’S POTENTIAL Open Banking has long been hailed as one of the major trends shaping the future of banking. Adoption rates have been sluggish at best, but it looks as though things have begun to change over the last two years. So is 2020 the year Paul Harrald Cristina Alba Ochoa Open Banking comes into its own? Or is there still a way to go before this revolutionary model is fully embraced? Head of Curve Credit Chief fi nancial offi cer, OakNorth

IN 2018, WILLINGNESS FOR ADOPTION OF OPEN ALTHOUGH CONSUMERS AND BUSINESSES WERE SLOW TO EMBRACE FORWARD-THINKING BANKS STARTED INVESTING EARLY BANKING WAS LOW IT, EUROPEAN BANKS BELIEVED THAT THOSE AMONG THEM WHO When banks stated they planned to make their major investments in Open EXPLOITED OPEN BANKING BY 2020 MIGHT GENERATE... Banking initiatives.

Lending 20% Europe revenue pool

Current account 21% 44% revenue pool of SMEs won’t pay for any Open Banking service Payments 17%

Retail 12% investments

, Accenture 2018 Charlotte Crosswell Andy Maguire 25% Chief executive, Innovate Finance Chair of Thought Machine, former chief operating offi cer of HSBC will not share data with other financial providers under any circumstance ROUNDTABLE BUT HOW ARE BANKS AND SOME BANKS ARE 17% 70% 10% 3% 0% MEASURING OPEN BANKING ALREADY REAPING THE SUCCESS IN 2020? REWARDS By 2019 By 2018 Financial institutions rated Global banks were asked what By 2020 Meeting the the top Key Performance the impact of Open Banking Indicators for their has been on their organisation

% Already invested 42 investments in Open Banking. in the last 12 months. would not switch provider for any Open Banking service or product challenge of 2019 2020 KPMG 2018 No plan beyond compliance a digital future 28% UK CONSUMERS STILL NOT FULLY ON BOARD The coronavirus pandemic has given added impetus IN 2019 44% 31% North America Consumer sentiment (measured by analysing to digital fi nance. A virtual roundtable of fi ve experts Revenue growth from discussion posts sourced from Twitter, Weibo, new customers discusses lessons to be learnt, unmet consumer needs WeChat, forums and blogs) showed that consumers Paul Taylor still weren’t ready to embrace open banking. and the opportunity of “embedded” fi nance Chief executive, Thought Machine Has allowed us to improve UK customer service

30% 58% 12% Gren Manuel 39% Global What are the lessons from the should change no one’s credit score; it’s a Some people may buy a car with a loan even advantages they have already. For instance, Q pandemic so far? random, macro-economic event, credit- though they could pay for it with cash. It people who have all this smart tech in their Revenue growth from new 28% What COVID-19 has made banks real- worthiness has not changed although doesn’t make sense rationally, but it’s a mix- house, they are not thinking about the data 28% 62% 10% financial service or products CAO 34% ise is lending decisions have typically affordability may have. ture of emotions to do with big decisions in which they are then providing on the back been based on backward-looking, historical Banks will move your life. of that. This could have an impact on the Positive Neutral Negative models. At OakNorth, we specialise in com- Is the shift to digital channels For SMEs, we believe there is a signif- insurance products you are offered in the Q from partnerships, CAO percentage percentage percentage mercial lending and there was no model pre- permanent? icant funding gap. We have quanti- future. We also need to understand how dicting what would happen to credit in a pan- Digital is great for some things, but to investment, to fi ed this globally, with external international people are changing their buying behav-

23% 63% 9% 5% 0% AM EY 2019 Has allowed us to demic, especially to small and medium-sized there are limitations and I think it will acquisition, then building banks, and we think worldwide it is $1.3 tril- iour, with millennials more likely to want to deliver new services enterprises (SMEs). So banks are now having swing back; the question is how far. Look lion to $1.5 trillion. It means many entrepre- lease than buy, and think about the fi nan- 63% to start building forward-looking models. at business loans: if you upload your it themselves neurs are in growth mode, they need more cial products they need. By 2019 By 2018 37% By 2020 Obviously, we weren’t prepared to dis- accounts and you don’t like the answer, than £1 million and there is no optimised I imagine it’s hard to get a good com- CC CAO BANKS EXPECT TO SEE A RETURN ON THAT tribute funds to SMEs quickly enough. ultimately you need to talk to a human. debt fi nancing that is not super expensive or mercial agreement on an embedded Revenue growth from new When the Coronavirus Business Interruption There’s a lot of issues around the resil- super time consuming. fi nance partnership and it would be even

INVESTMENT SOONER RATHER THAN LATER Already invested developer services or APIs Loan Scheme was put together, they didn’t ience of our fi nancial system; the I agree that people would like their harder if services are integrated. Whoever PH Half of financial institutions are optimistic have the best fi ntech brains around the solutions need great technology, but also it’s incredibly hard to bring that in at speed. fi nancial lives to be simpler. There is has the bigger access to the customer or to of UK consumers have reduced or about the payback period of their Open Banking table, which would have helped to get distri- great people. But over time they will learn from that. They potential frustration in trying to manage that service is best placed to do it and may investments. 44% stopped using bank branches during

No plan beyond compliance bution going. The traditional banks can’t will move from partnerships, to investment, multiple relationships in a more competitive try to take advantage of someone smaller. the pandemic possibly supply all the demand for loans Apart from the move to digital, have to acquisition, then building it themselves. environment. Also, I think there is clearly an Q 42% 8% 50% coming from SMEs in the next year, so it’s a other consumer behaviours changed? If you look at the traditional banks, appetite for people to have slightly more Do embedded fi nance products suffer Bain & Company, September 2020 More than Don’t know/ Less than APAC CAO Q 20% time for fi ntech, in the broadest sense, to We have seen an explosion in savings their fully integrated systems are racy personal savings. People quite like an inherent lack of transparency? 4 years sunk costs 4 years CAO shine. We have an opportunity to pull despite much lower rates. We’ve great for some things, but they are not agile. retail brokerages, they are very interested in As Cristina said, there is a risk that AM 31% together the best of technology, the best of done some surveys with depositors, who say They can’t change their upstream and things like cryptocurrencies, but the con- when you get two institutions together, fi nance, the best of alternative lending and they don’t want to put their savings in shares downstream processes as fast as someone duct regulators are of the view that this is they will talk about how big they can make Market share growth We are still in the early stages of really help the economic recovery. or bonds that are perceived to be riskier, like us. So we do believe partnerships are perhaps not a thing for everybody. the pie, then argue about the size of the Thought Machine is an infrastructure which indicates people have become more the future. slice they each get. It’s not necessarily about adoption so difficult to establish PT company, we don’t deal with consum- risk averse. There is a lot of interest in so-called making things better for consumers. Q ers directly, but of course everything we do It’s too soon to tell. Some people say What are the embedded fi nance, creating products Once you start to embed things like AM Q PH is built so the customer gets a better experi- we have become a nation of savers; I unmet needs? or services that integrate fi nancial with credit, there is only a particular level of $ trn ence. But what does that mean in this par- don’t think we have. We have been a nation There’s not a long list of services that non-fi nancial elements, often driven by complexity that can be disclosed. A cynic AM 3.6 15% ticular context? Some traditional banks unable to do retail shopping for a while. don’t exist. Banking is not a recrea- data. A car dealer, for instance, could sell a like me might argue that one of the purposes projected value that will thought speed is something for the impa- One of the most interesting effects has tional activity; it is a facilitator of the things car with not only fi nancing but also insur- of complexity is to make price comparisons PH eventually be created by embedded 21% tient millennial generation and that there’s been a startling shift away from credit people want to do in their life. And more or ance, which would reduce in price if the deliberately diffi cult because companies fi nance businesses nothing wrong with making people wait, but cards as a payment instrument towards less, it serves them reasonably well, car’s sensors established you are a cautious don’t want to be compared solely on a single 17% this isn’t the case. Unexpected events debit cards. When consumers borrow, they although it could be less clunky in all sorts of driver. Is this a major opportunity? number. The other issue is these products Bain Capital, 2019 happen all the time and the pandemic are doing more with a Klarna or Curve ways. It just needs to be as frictionless as From the technology industry point of blur the distinction between one part of PT Churn rate There hasn’t been any exposes that you need to be able to move Credit-style short-term instalment loan. possible and as human as it needs to be. view, doing this well has proved to be your life and another, for instance blurring significant impact or change quickly to service consumers. This is a global phenomenon, I suspect I’m a recent joiner to the fi nance world, incredibly hard for a variety of reasons. You the distinction between deciding to buy 14% 51% 29% 3% 0% PT Banks like DBS in Singapore didn’t just driven by a sense of responsibility and a dis- having worked for 20 years in artifi cial need it all to integrate so it appears seam- something and fi nancing it. PH Tink 2020 Tink 2020 Finastra 2020 offer interesting types of loan for- affection with the blurred distinction intelligence, which is really at the forefront of less. Also, companies generally want to own bearance; they provided an instant educa- between paying and borrowing that can innovation. I think there are good ideas in the whole product stack, just like Netfl ix But isn’t it the blurring that generates Under embedded fi nance, fi nancial By 2019 By 2018 By 2020 Q Q tion programme about managing through a create persistent debt. banking, but I remain to be convinced there wants to own its own stack from customer the convenience? services become a hidden part of a crisis and accessing their products and are going to be any fundamental shifts in the experience to creating movies. If we’re going There is more subtlety than that. product. What does this do to the value of PT other peoples’. This shows banking and products offered to customers. But there are to do it, we have to do it exceptionally well. Having everything in one place gener- Already invested Andy, you had a long career at a fi nancial brands? IN 2020, SPENDING ON OPEN BANKING INITIATIVES HAS REACHED NEW HEIGHTS Q fi nance need not be purely technology and global bank. How many of these huge shifts in how well we can do it. When Yes, we have to do it really well, but ates confusion. If you look at the social I suspect brands will continue to be very AM PH 63 per cent of financial executives say their organisation’s Open Banking spending has increased since 2019. effi ciency; it makes both human and fi nan- changes are expected in a recession? things are working well, the customer journey also securely, with the right protec- media world, you might use one app for important, especially in the retail world, cial sense to treat this thing as a relation- We’ve seen some of these changes, for most banks is fi ne, but when you get off tion, no fraud and no exploitation. How do photo-sharing and another for video-shar- where people simply cannot do due diligence AM

No plan beyond compliance ship. A good example is credit scoring. sadly, before. You do see people that path, the level of pain can be astonishing. you make it frictionless if you’re building in ing. It’s the way we work psychologically; it’s with every potential counterparty. Research In my opinion, an event like COVID-19 become more fi nancially conservative and The unmet need is simplicity. Think how all these protections? how we understand and partition. I think suggests people are more open to handing CC paying more attention to stuff like debt. And easy it is to change energy provider. We have to think about where Big Tech technology often works best when it refl ects their fi nancial life over to different types of CC Global then people forget pretty quickly, and then Changing a mortgage provider, however, can fi ts into this discussion and the data the objects in the real world rather than brands. The interesting question is whether it all goes back to the way it used to be - at a take three months as the new provider goes being necessarily super effi cient. they would be happy putting their money in Already invested 18% macro level at least. through the paperwork and you prove who When people talk about simplifi cation, the hands of a tech company. But they will still PH 45% 7% 31% 17% you are. Because of this complexity, people what they are not saying is take a bunch want to deal with a company with a brand By 2018 61% Banks have accelerated their internal often re-fi x with their current provider. We of very different things and put a wrapper over presence. And that brand may well be a bank. Q 1 million to 49.9 By 2019 16% digital processes over the last six expect resistance from some fi nancial insti- them and somehow the world will be a less million euros months. Do they still need to partner tutions to change this, but it would be on my complicated place. Mixing your electricity bills By 2020 4% with fi ntechs? wish list for regulators. with your pension would just add to complex- For more information please visit More than 100 50 million to 99.9 Less than 1 Every fi nancial institution we have We have to be careful about romanticis- ity. Providing a wrapper of similar activities thoughtmachine.net No plan beyond The pandemic exposes CC AM 1% been speaking to, not just banks but ing simplifi cation. Financial products provides immense convenience and pro- million euros million euros million euros compliance that you need to be also asset managers and insurers, is expe- are not commodities and they are not all the The solutions need motes competition. When fi nances become able to move quickly to diting their digital transformation and I think same. Under open banking, you can do price great technology, but embedded, it may be diffi cult or inconvenient Tink 2020 Accenture 2018 that will continue quite aggressively. In the optimisation, but people choose and use to switch, and it's a shame when profi ts accrue service consumers short term it will result in partnerships as products for different emotional reasons. also great people because of this mere fact. RACONTEUR.NET 3

Commercial feature

Paul Harrald Cristina Alba Ochoa Head of Curve Credit Chief fi nancial offi cer, OakNorth

Charlotte Crosswell Andy Maguire, Chief executive, Innovate Finance Chair of Thought Machine, former chief operating offi cer of HSBC

ROUNDTABLE Meeting the challenge of a digital future The coronavirus pandemic has given added impetus to digital fi nance. A virtual roundtable of fi ve experts

discusses lessons to be learnt, unmet consumer needs Paul Taylor and the opportunity of “embedded” fi nance Chief executive, Thought Machine

Gren Manuel

What are the lessons from the should change no one’s credit score; it’s a Some people may buy a car with a loan even advantages they have already. For instance, Q pandemic so far? random, macro-economic event, credit- though they could pay for it with cash. It people who have all this smart tech in their What COVID-19 has made banks real- worthiness has not changed although doesn’t make sense rationally, but it’s a mix- house, they are not thinking about the data CAO ise is lending decisions have typically affordability may have. ture of emotions to do with big decisions in which they are then providing on the back been based on backward-looking, historical Banks will move your life. of that. This could have an impact on the models. At OakNorth, we specialise in com- Is the shift to digital channels For SMEs, we believe there is a signif- insurance products you are offered in the Q from partnerships, CAO mercial lending and there was no model pre- permanent? icant funding gap. We have quanti- future. We also need to understand how dicting what would happen to credit in a pan- Digital is great for some things, but to investment, to fi ed this globally, with external international people are changing their buying behav- AM demic, especially to small and medium-sized there are limitations and I think it will acquisition, then building banks, and we think worldwide it is $1.3 tril- iour, with millennials more likely to want to enterprises (SMEs). So banks are now having swing back; the question is how far. Look lion to $1.5 trillion. It means many entrepre- lease than buy, and think about the fi nan- 63% to start building forward-looking models. at business loans: if you upload your it themselves neurs are in growth mode, they need more cial products they need. Obviously, we weren’t prepared to dis- accounts and you don’t like the answer, than £1 million and there is no optimised I imagine it’s hard to get a good com- CC CAO tribute funds to SMEs quickly enough. ultimately you need to talk to a human. debt fi nancing that is not super expensive or mercial agreement on an embedded When the Coronavirus Business Interruption There’s a lot of issues around the resil- super time consuming. fi nance partnership and it would be even Loan Scheme was put together, they didn’t ience of our fi nancial system; the I agree that people would like their harder if services are integrated. Whoever PH have the best fi ntech brains around the solutions need great technology, but also it’s incredibly hard to bring that in at speed. fi nancial lives to be simpler. There is has the bigger access to the customer or to of UK consumers have reduced or table, which would have helped to get distri- great people. But over time they will learn from that. They potential frustration in trying to manage that service is best placed to do it and may stopped using bank branches during bution going. The traditional banks can’t will move from partnerships, to investment, multiple relationships in a more competitive try to take advantage of someone smaller. the pandemic possibly supply all the demand for loans Apart from the move to digital, have to acquisition, then building it themselves. environment. Also, I think there is clearly an Q coming from SMEs in the next year, so it’s a other consumer behaviours changed? If you look at the traditional banks, appetite for people to have slightly more Do embedded fi nance products suffer Bain & Company, September 2020 CAO Q time for fi ntech, in the broadest sense, to We have seen an explosion in savings their fully integrated systems are racy personal savings. People quite like an inherent lack of transparency? CAO shine. We have an opportunity to pull despite much lower rates. We’ve great for some things, but they are not agile. retail brokerages, they are very interested in As Cristina said, there is a risk that AM together the best of technology, the best of done some surveys with depositors, who say They can’t change their upstream and things like cryptocurrencies, but the con- when you get two institutions together, fi nance, the best of alternative lending and they don’t want to put their savings in shares downstream processes as fast as someone duct regulators are of the view that this is they will talk about how big they can make really help the economic recovery. or bonds that are perceived to be riskier, like us. So we do believe partnerships are perhaps not a thing for everybody. the pie, then argue about the size of the Thought Machine is an infrastructure which indicates people have become more the future. slice they each get. It’s not necessarily about PT company, we don’t deal with consum- risk averse. There is a lot of interest in so-called making things better for consumers. Q ers directly, but of course everything we do It’s too soon to tell. Some people say What are the embedded fi nance, creating products Once you start to embed things like AM Q PH is built so the customer gets a better experi- we have become a nation of savers; I unmet needs? or services that integrate fi nancial with credit, there is only a particular level of $ trn ence. But what does that mean in this par- don’t think we have. We have been a nation There’s not a long list of services that non-fi nancial elements, often driven by complexity that can be disclosed. A cynic AM 3.6 ticular context? Some traditional banks unable to do retail shopping for a while. don’t exist. Banking is not a recrea- data. A car dealer, for instance, could sell a like me might argue that one of the purposes projected value that will thought speed is something for the impa- One of the most interesting effects has tional activity; it is a facilitator of the things car with not only fi nancing but also insur- of complexity is to make price comparisons PH eventually be created by embedded tient millennial generation and that there’s been a startling shift away from credit people want to do in their life. And more or ance, which would reduce in price if the deliberately diffi cult because companies fi nance businesses nothing wrong with making people wait, but cards as a payment instrument towards less, it serves them reasonably well, car’s sensors established you are a cautious don’t want to be compared solely on a single this isn’t the case. Unexpected events debit cards. When consumers borrow, they although it could be less clunky in all sorts of driver. Is this a major opportunity? number. The other issue is these products Bain Capital, 2019 happen all the time and the pandemic are doing more with a Klarna or Curve ways. It just needs to be as frictionless as From the technology industry point of blur the distinction between one part of PT exposes that you need to be able to move Credit-style short-term instalment loan. possible and as human as it needs to be. view, doing this well has proved to be your life and another, for instance blurring quickly to service consumers. This is a global phenomenon, I suspect I’m a recent joiner to the fi nance world, incredibly hard for a variety of reasons. You the distinction between deciding to buy PT Banks like DBS in Singapore didn’t just driven by a sense of responsibility and a dis- having worked for 20 years in artifi cial need it all to integrate so it appears seam- something and fi nancing it. PH offer interesting types of loan for- affection with the blurred distinction intelligence, which is really at the forefront of less. Also, companies generally want to own bearance; they provided an instant educa- between paying and borrowing that can innovation. I think there are good ideas in the whole product stack, just like Netfl ix But isn’t it the blurring that generates Under embedded fi nance, fi nancial Q Q tion programme about managing through a create persistent debt. banking, but I remain to be convinced there wants to own its own stack from customer the convenience? services become a hidden part of a crisis and accessing their products and are going to be any fundamental shifts in the experience to creating movies. If we’re going There is more subtlety than that. product. What does this do to the value of PT other peoples’. This shows banking and Andy, you had a long career at a products offered to customers. But there are to do it, we have to do it exceptionally well. Having everything in one place gener- fi nancial brands? Q fi nance need not be purely technology and global bank. How many of these huge shifts in how well we can do it. When Yes, we have to do it really well, but ates confusion. If you look at the social I suspect brands will continue to be very AM PH effi ciency; it makes both human and fi nan- changes are expected in a recession? things are working well, the customer journey also securely, with the right protec- media world, you might use one app for important, especially in the retail world, cial sense to treat this thing as a relation- We’ve seen some of these changes, for most banks is fi ne, but when you get off tion, no fraud and no exploitation. How do photo-sharing and another for video-shar- where people simply cannot do due diligence AM ship. A good example is credit scoring. sadly, before. You do see people that path, the level of pain can be astonishing. you make it frictionless if you’re building in ing. It’s the way we work psychologically; it’s with every potential counterparty. Research In my opinion, an event like COVID-19 become more fi nancially conservative and The unmet need is simplicity. Think how all these protections? how we understand and partition. I think suggests people are more open to handing CC paying more attention to stuff like debt. And easy it is to change energy provider. We have to think about where Big Tech technology often works best when it refl ects their fi nancial life over to different types of CC then people forget pretty quickly, and then Changing a mortgage provider, however, can fi ts into this discussion and the data the objects in the real world rather than brands. The interesting question is whether it all goes back to the way it used to be - at a take three months as the new provider goes being necessarily super effi cient. they would be happy putting their money in macro level at least. through the paperwork and you prove who When people talk about simplifi cation, the hands of a tech company. But they will still PH you are. Because of this complexity, people what they are not saying is take a bunch want to deal with a company with a brand Banks have accelerated their internal often re-fi x with their current provider. We of very different things and put a wrapper over presence. And that brand may well be a bank. Q digital processes over the last six expect resistance from some fi nancial insti- them and somehow the world will be a less months. Do they still need to partner tutions to change this, but it would be on my complicated place. Mixing your electricity bills with fi ntechs? wish list for regulators. with your pension would just add to complex- For more information please visit Every fi nancial institution we have We have to be careful about romanticis- ity. Providing a wrapper of similar activities thoughtmachine.net The pandemic exposes CC AM been speaking to, not just banks but ing simplifi cation. Financial products provides immense convenience and pro- that you need to be also asset managers and insurers, is expe- are not commodities and they are not all the The solutions need motes competition. When fi nances become diting their digital transformation and I think same. Under open banking, you can do price great technology, but embedded, it may be diffi cult or inconvenient able to move quickly to that will continue quite aggressively. In the optimisation, but people choose and use to switch, and it's a shame when profi ts accrue service consumers short term it will result in partnerships as products for different emotional reasons. also great people because of this mere fact. 4 FUTURE OF BANKING & CAPITAL INVESTMENT

OPEN BANKING A slow, ‘gentle nudge’ in the right direction

Open Banking was meant to revolutionise the UK banking sector, but a complete transformation of the industry has yet to Getty, Jacobs Stock Photography Ltd materialise

Jonathan Weinberg

t has been nearly three years since I the Second Payment Services Directive (PSD2) came into force. A much heralded move, has this piece of European legislation enabled the UK's tra- ditional financial services sector to digi- tally transform or is it yet to fully embrace the potential of Open Banking? The UK’s Competition and Markets Authority (CMA) had hoped PSD2, which arrived in January 2018, would level the playing field between incumbent legacy banks and smaller fintech challengers. Enabling newcomers to get a foothold for growth in the market was an issue high- Using new apps and websites, custom- the market in favour of consumers and [application programming interfaces] and lence, an awareness-raising group, join- lighted in 2016 by the CMA which went ers can see a single clear view of their small businesses". propel their services into the mainstream. ing forces with Moneyhub Enterprise on to set up the Open Banking Implemen- finances to deliver more effective budg- But others are less sure. Luc Gueriane, Making infrastructure readily available and Streeva to power charity donations tation Entity (OBIE) to "create software eting, gain easy access to the best deals, chief commercial officer at payment solu- will be key." by scanning a QR code with a phone. It standards and industry guidelines that services and credit options from the tions company Moorwand, believes Open Adam Bialy, chief product officer at then pays directly from the user's bank drive competition and innovation". whole market and spot fraud faster. Banking is failing. ”Beyond the reluctance OpenPayd, adds: "The APIs are being built account to the charity’s account with 2M+ However, experts are divided on whether Official figures out in September do from banks, low-consumer awareness and and the infrastructure is in place, but few automated Gift Aid. users of Open Banking-enabled this has been achieved. Many highlight appear to be promising. Users of Open the limited number of services are also key banks are meeting PSD2 requirements. Freddy Kelly, co-founder and chief exec- products, double the number slow movement by some of the incum- Banking-enabled products exceeded to its failing,” he says. "Open Banking has been less of a cata- utive of Open Banking credit reference there was 6 months ago bents, despite the new arrangements for two million, a doubling in just over six "The products that are there are often lyst and more of a 'gentle nudge', with con- agency Credit Kudos, is another seeing secure sharing of current account infor- months. Imran Gulamhuseinwala, trus- overshadowed by the reliability and security sumer-facing applications being limited to the benefits, this time for loans. He says: Open Banking Implementation Entity 2020 mation with third-party providers, offer- tee of OBIE, which is funded by the UK's which is associated with incumbent players. chiefly account aggregation services." "A growing number of lenders, includ- ing transformative tools for personal cus- nine largest banks and building socie- "It must become both easier and cheaper And while Mike Hampson, chief exec- ing banks, are embracing Open Banking tomers and smaller businesses. ties, says Open Banking is "rebalancing for new players to build Open Banking APIs utive of Bishopsgate Financial, feels the as it helps them better understand a cus- slowness was due to the difficulty of tomer’s behaviour in a rapidly chang- "adapting API legacy architecture to be ing world. By a borrower securely shar- flexible and responsive, rather than a ing their bank transaction data through Commercial feature deliberate attempt to stifle the competi- Open Banking, the lender is able to detect IN Commercial feature Commercial feature tion", he says: "But now, banks can use the a customer’s recent loss of, or significant 1 5 competitive data held by other providers, change in, income as well as identify new to expand and rebundle their services, borrowing behaviour." while improving their bottom line." Ada Westerinen, Europe, Middle East adults started using online One suggestion for such innovation is to and Africa director of solutions con- banking apps during lockdown take more advantage of account-based pay- sulting for partners at MuleSoft, is also ments within the retail sector, as this would upbeat. “Open Banking is a huge oppor- cut the cost of commerce, but Bialy explains tunity for banks to unlock new sources of Rise of the ‘cognitive bank’ this is being hindered by "clunky user authen- revenue if they can build highly person- Banking during tication flows that are different for each bank". alised customer experiences in collabora- This is still the right leap forward, tion with other banks and service provid- according to Jonathan Hughes, chief exec- ers," she says. % utive of payment and banking experts Pol- "Banks have taken steps towards becom- 54 Increasing customer expectations, including shifts due to the coronavirus the pandemic linate Horizons. ”For merchants, there are ing curators of financial services, estab- pandemic, are accelerating the drive towards next-generation banking significant economic advantages to accept- lishing marketplaces in which customers ing payment through an Open Banking and providers can come to select the best now use them regularly platforms and systems, supported by hybrid cloud infrastructure, that are transaction, rather than on the card rails,” products at the right price. and beyond he says. “The large enterprises that adopted "By embracing this mindset, traditional Angela Byrne Managing director ushering in the era of the “cognitive bank” Open Banking early on have forecast huge banks can behave more like Silicon Valley been more important than ever in 2020 as Steven Cochran Head of products and growth platforms Shared experience and digital transformation savings when compared to using cards, startups, creating new revenue channels the world responds to the COVID-19 pan- An expert panel, meeting around a virtual Allied Irish Bank NatWest Group which in turn could result in savings for by sharing their core banking capabilities demic,” he says. small and medium-sized enterprises.” and customer base with authorised inno- "We’re looking forward to seeing more roundtable, discuss the changing face of However, on the other side of the vir- vation partners." people than ever before use their banking anks have faced numerous chal- faster and cheaper to build and operate, onboarding, so they know who is on the tual coin, Open Banking is solving exist- One such innovator is Victor Trokoudes, data to empower themselves and break banking and customers’ needs B lenges over the last decade in but remain secure. They’re also open by phone without having to authenticate in ing problems and defining new ways co-founder and chief executive of free down financial barriers. When this hap- the hunt for both efficiency design and therefore able to connect easily the traditional ways.” of doing things, from targeting recom- money management app Plum. He esti- pens, we’ll see the true impact: no more and a customer experience that meets to other companies and service providers. IBM helps clients transform into cogni- mendations for restaurants, attractions mates Plum can make the average person companies that overcharge people, better fast-evolving expectations in the digital These new systems are based on hybrid tive banks in three ways. Firstly, IBM is the and activities based on previous finan- £186,000 better off over their lifetime. "The financial literacy and engagement, and age. The coronavirus pandemic has accel- cloud infrastructure, easing the flow of only organisation with a secure financial cial behaviour, to Open Banking Excel- kind of financial resilience this brings has true wealth for all." erated the need for banks to transform. data and allowing the use of artificial intel- services cloud, allowing banks the bene- Achieving this kind of speed and agility is ligence (AI). IBM believes these cognitive fits of public cloud, but with controls that What types of emerging technology they’re actually piled up on the backend Q tough in legacy operations. banks, which infuse AI throughout all their mean they can feel confident their data is are helping the financial services trying to process things. The user experi - Often banks will appoint a chief transfor- operations and processes, are the future secure. Secondly, the company has sub- industry to meet changing customer needs? ence is so good, the technology is so mation or chief digital officer who will work of banking. stantial depth and breadth of skills to sup- But as a sign of what could be possible, Wagestream enables Throughout the pandemic it’s been available, the inbound request of all these AB across the organisation to improve service port banking transformations. And finally, you only have to look at the winners of employees to stream a really clear that customers wanted to transactions has really challenged the and overall customer experience. They will IBM partners with an ecosystem of com- this year's Open Up 2020 Challenge from 4 proportion of their income get in touch with us a lot. The use of artifi- ability to process some of the queues in tend to take a customer journey approach panies that develop key cloud-based soft- innovation foundation Nesta. The contest as it is earned, save directly from cial intelligence (AI) as an emerging tech- some cases. It’s a good problem to solve. to, for example, opening an account, ware applications, which further assist Magni Oleg Unsplash, attracted 107 applicants, which resulted their salary, track their wages and nology has aided us hugely in helping to The move to the back office and Philip Garner Kevin Trilli SC Innovation Lead Chief product officer understanding the customer painpoints, banks in their transformation. in 15 finalists. Each of the four winners bank balance, and set smart payment solve customers’ needs, be that through being able to process loan requests Lloyds Banking Group Onfido and then working out how to make it better “We are building a services organisation will now get a £150,000 grant, on top of reminders in real time. chatbots or in implementing technology to and those payment holidays in a paper- through the use of technology. across 110 countries,” says Paul Briscoe, £50,000 awarded at the finalist stage, to try to make things more safe and secure less way was a huge step forward. The On the face of it, banking apps and IBM believes these senior partner in IBM's Core Banking and grow their solution to help more people Lubaina Manji, senior programme for customers. bank could have planned for that for 12 websites have made significant strides. A Payments Practice. “We construct some- manage their money. manager of Open Up 2020 Challenge, Firstly, there was an almost overnight months and we still wouldn’t have landed that and to make the experience joined testing, all these different things are addition to being able to focus and spe - Where do you see the banking industry cognitive banks, which PG Q loan can often now be approved in hours, thing unique for each customer. We know Nesta Challenges, says: "Open Banking change in how different customers it on time, yet we had to do it in weeks. up, whether it’s starting in digital, then important because you always have happy cialise, we also have an aggregate knowl - in five years’ time? instead of weeks, and digital onboarding infuse AI throughout that each specific product might not fit every Mojo Mortgages MortgageScore has revolutionised the way people needed to interact with us and so those The customer-interface technology has handing off to human support, or contin- paths and unhappy paths, and people edge of all our customers we can bring. It’s clearly becoming a mobile experi- KT of customers can be completed in min- all their operations and financial institution and combinations of combines credit and Open manage their money and put them in different channels had to adapt. There been crucial. But the back-office archi - uing digital straight through. stuck in the middle. How do you think You need to find those extra benefits for ence. The brands will continue; they utes. But the systems that underpin them solutions might be unique each time. These 1 Banking data to determine if control of their financial data. were a number of technologies underpin- tecture required to deliver that has been through that? Having a design-first partnerships to work. Potentially, work- are going to be looked at in the future as are up to 40 years old and are expensive are complex, multi-year digital journeys. a customer is mortgage ready while Despite its huge potential, it had a ning our ability to manage those volumes equally important. How important is feedback along the approach to designing these flows is criti - ing with a vendor, even part time for a trusted repositories of our information. processes, are the Q and time consuming to change. “IBM’s global knowledge means we can the MortgageCoach feature provides slightly slow start with many people up and down such as the use of automa- customer journey for banks to improve cal, especially when you introduce differ- few years, can bring something to market If you think how many internet-ena- PG “Every established bank has trans- future of banking make sure what we construct and help personalised advice on how they could initially unsure about sharing their tion, AI and cloud. In terms of interaction, how can their levels of service? ent types of security that might be right faster than the build side of it. bled devices there will be, some ele- Q formed their processes, but there is a banks build is compliant with regulations improve their score. financial data or the benefits it would In some cases, a lot of banks have banks find a balance between digi- That ongoing feedback is imperative turns or left turns for the user. ments of banking may become more Are these four Open KT AB limit to how far they can go with their in each individual country. IBM Cloud for offer them. made it so good on the frontend tal and the human touch? and also helps us with fixing pain- Has the pandemic prioritised the embedded in our daily activities. That will Q existing technology,” says Simon Ward, Financial Services allows banks to under- Banking apps a sign Moneybox is an app that helps "The £1.5-million challenge, run in It does need both, we see that from points and with research. In a digital world, How can partnerships between the development of products that are just make people’s lives better and easier. SC Q lead partner in the Global Thought “Banks will become more like software stand what they're doing with their data of the future? customers save and invest by partnership with OBIE, was designed our customers and, up until now, it feedback is instant, whether it be on social incumbent banks and fintechs help to able to respond and adapt easily to But I also think that other aspects of bank- Machine Practice at IBM. companies,” says Ward. “They will have and what controls they have put in, and 2 setting money aside through to boost people’s awareness, trust was almost seen as a convenient oppor- media or as part of the journey, and it’s deliver change? changing customer needs? ing will, in turn, become more visible such “Before COVID-19, established banks engineers and data scientists. People will therefore how they can evidence that to Open Banking is being used in many round-ups, one-off or regular deposits and adoption of Open Banking- tunity for banks to close branches. imperative we continue to leverage that. I think it’s been an approach that we, We used to build a product, and you as engaging with customers to give them a PG SC were thinking about how they could get spend less time doing clerical activities, the regulator in their particular location.” different ways to aggregate bank with the option to put the money into enabled finance apps." Actually, this has shown we have to move You have that real-time performance at Lloyds, are seeing as increasingly took a loan and you repaid it over better picture of their financial health and PG to anything near the agility and cus- freeing them up to focus on helping cus- account information, provide access to stocks and shares ISAs, lifetime ISAs, New research from Open Up 2020 of the branch to the customer, into their data throughout your various jour- important to parts of our transformation five years or 25 years, and we saw you at helping them plan for the longer term. tomer experience of their neo rivals. tomers with complex financial transac- credit, manage debts, apply for loans savings accounts and pensions. 2,000 adults across the UK has found living rooms, into their phones, and neys. If you can see there are problems agenda, particularly as the maturity of the the end and that was it. That’s all The pandemic has intensified the desire tions. When you contact your bank, you For more information please contact or mortgages and make saving easier. 82 per cent of people who already The use of artificial that’s worked really well. within that – users getting stuck at some fintech sector has grown so much over the changed now. This is going to become a for transformation and cost efficiency. will talk to a virtual agent which will be Paul Briscoe, senior partner at The app store run by the Open Banking Plum is a free money used Open Banking-enabled apps said Customers will expect a seamless point in the journey – you can get in there past few years. really emerging area for us in the next For more information please visit AB Previously, a small number of banks were powered by AI and only if your query falls [email protected] Implementation Entity (OBIE) currently management app that they helped them improve how they intelligence (AI) as an customer experience, so combining and address it; you don’t need to wait for It can be a tense relationship at times. 12 months. onfido.com SC thinking about radical transformation, out of certain boundaries will you be con- has 89 different Open Banking mobile automatically sets aside small manage their money with four in ten digital where they can self-serve should feedback to find its way through the But we both do want the same thing Also, through the pandemic, we’ve 3 emerging technology AB now many more of them are and they’re nected to a human agent. applications and online products amounts every few days and can invest happy to share their data with apps they want to do so and then also integrat- organisation. and I think fintech partnerships for banks shown that we can do it, so we can speeding up.” “The AI will monitor regulation changes across consumer, business and the money. It also finds better deals on like this to get personalised guidance has aided us hugely ing that with the human support experi- Everything we do here needs to be are absolutely critical because that is be nimble and we can react quickly. KT What they are accelerating towards is and then relay exactly what changes technical services. bills and offers spending insights. or to save money. in helping to solve ence seamlessly, is important. If it is not tested, so we’re getting lots of feed- where most of the innovation will come. Being nimble and flexible, and able to the next generation of banking platforms. are needed to the bank’s processes. seamless, it will create friction. So there back all the time through live behaviour. It’s very important to find areas you respond to those expectations quickly, is KT Built on cloud-native technology, they’re Cognitive banks will use biometrics in customers’ needs has to be a concerted effort to integrate This tried-and-true approach of A/B can trust third parties to work on. In going to be a competitive advantage. RACONTEUR.NET 5

THE REAL POTENTIAL OF DIGITAL- core, particularly as tech giants like Apple and Facebook make further inroads into FIRST BANKS the sector. From the power to promote widespread “These Big Tech firms have the advan- financial inclusion, to their magnet-like ability tages of big data; they know so much more Shutterstock, IR Stone to attract investment, here are some ways about us than any bank does and can offer nimble new fintechs are making Tier-1 banks much more tailored products,” says Beck. look redundant. Tech-based providers have also started to tap into a market traditionally over- looked by the biggest banks: people shut out of the system who cannot open a bank account. When Facebook last year unveiled Libra, its blockchain-based pay- $ BN ment system, it said one of its most impor- Invested50 in fintechs every year tant markets would be the billions unable to access traditional banking services in the developing world. Charity Turn2Us notes that around 1.3 million people don't have bank accounts in the UK. “This is highly problematic for so many reasons; it makes claiming benefits much harder, it reduces options for getting 500+ decent deals with phone contracts, utility New fintechs created each year providers and broadband companies, and it makes getting any sort of credit incredi- bly difficult,” a spokesman says. He adds the flexible measures put in place by banks during the pandemic could also provide ideas for other products. “Mortgage holidays, payment freezes and 40% interest-freeze overdrafts should be avail- able to anyone experiencing a life-chang- ing event. Life events often cause financial Existing banking roles will be hardship,” Turn2Us points out. disrupted by machine-learning Beck doubts big banks will rush to change as there simply is not enough profit in serv- Atos 2020 ing the unbanked. It would take a change in regulations to enable lenders to open accounts with less than the usual amount BANKING MODELS of paperwork, at which point a viable mar- ket could emerge. “Too big to fail is still a problem if there’s By contrast, he thinks the biggest banks a systemic crisis,” he says, suggesting tax- will always take risks deemed unethical payers might still be on the hook in the because it’s so lucrative. “There will always event of another meltdown. I’m not sure you can or be ways for bankers to get around certain Why bigger isn’t “I could see creditors and shareholders rules on speculative activities because that having to carry the cross for a single bank should want to build a is where the money is. Any new bank would that got into trouble, but if we were hit by new tier-1 bank today get involved too, otherwise you would a crisis that undermined the financial sys- leave money on the table,” he says. tem as a whole and deposits were to flee, I to compete with, say, For this reason Beck agrees with Mag- always better suspect the ‘hit’ would be too big and sud- nus that "biggest is best” is not the right Goldman Sachs den to allow.” mantra. “I actually think the banking This won’t cheer a small lender dream- system needs to shrink. If there were Daniel Thomas Is it possible to build ing of entering the big league, particularly fewer players, they would find it easier given the other financial hurdles they are to make better returns and that would a tier-1 bank from f anyone knows about the failings system. Some have also seen their profits likely to face. be better for both customer service and I of big banks, it’s George Magnus, languish in the last decade due to tougher Banking markets such as the UK’s are sat- banks”, but he suggests organic growth, investors,” says Beck. scratch to compete who was one of the few economists regulation and intense competition. urated and interest rates are at record lows, while much slower, is preferable. Magnus thinks the only way we’ll avoid with the biggest high to predict the financial crisis of 2007-8. Still, it is not hard to imagine that a says Thorsten Beck, professor of banking “They should also look for niches where a rerun of 2007-8 is to bring in two dis- A key lesson from that debacle is that newer, tech-based challenger could one and finance at Cass Business School in they can get a higher return using tech- tinct models for tier-1 banks. On the street players and bigger is usually not better when it comes day reach the tier-1 scale and, if they do, London. That has left margins stretched nology [to cut costs]. So do less small and one hand, there would be low-risk retail to banks, says the former senior eco- customers and investors alike will ask the and profits under pressure, something medium-sized enterprise lending, which banks subject to looser oversight; on the would anyone even nomic adviser to UBS. “I’m not sure you same thing: can they avoid the mistakes of reflected in the large numbers of job cuts is high cost as you need to deeply assess other, higher-risk investment banks fac- 2M+ want to? can or should want to build a new tier-1 the past? being made by the likes of HSBC and the risk, and focus more on mortgage ing tougher rules. bank today to compete with say Goldman Magnus, who worked at UBS from 1995 to Deutsche Bank. lending where you can automate the risk “I can see newer banks can present mod- Sachs, J.P. Morgan or HSBC,” says Magnus. 2012, says the banking world is safer than Smaller players must also overcome reg- assessment process,” he says. els in which costs, profitability and fund- “These are the models we should be trying in 2008, but not safe enough. Lawmak- ulations that require them to hold a higher Big banks have a patchy reputation when ing risks are better addressed, but I don’t to move away from.” ers missed an opportunity after the crisis ratio of capital in reserve, along with trust it comes to customer service and inno- see any new banking models that pass Critics feel big banks have done too little to draw “thicker lines” between low-risk issues due to their less well-known brands. vation, unlike their more nimble fintech the ‘would they be OK in a systemic cri- to change their ways since the crisis, offer retail banking and higher-risk investment In such a tough set of circumstances, rivals that are gaining market share. So sis?’ test. For that, I think we’d still need to poor customer service and have failed to banking, and so many lenders continue to Beck says it would be tempting to try and any new tier-1 bank would have to have break them up and redefine their functions serve marginalised people shut out of the engage in both activities. expand quickly by buying up “bad legacy innovation and good user experience at its and risk profiles,” Magnus concludes.

Commercial feature

Banking during the pandemic and beyond Angela Byrne Steven Cochran Managing director Head of products and growth platforms Shared experience and digital transformation An expert panel, meeting around a virtual Allied Irish Bank NatWest Group roundtable, discuss the changing face of banking and customers’ needs

What types of emerging technology they’re actually piled up on the backend Q are helping the financial services trying to process things. The user experi - industry to meet changing customer needs? ence is so good, the technology is so Throughout the pandemic it’s been available, the inbound request of all these AB really clear that customers wanted to transactions has really challenged the get in touch with us a lot. The use of artifi- ability to process some of the queues in cial intelligence (AI) as an emerging tech- some cases. It’s a good problem to solve. nology has aided us hugely in helping to The move to the back office and Philip Garner Kevin Trilli SC Innovation Lead Chief product officer solve customers’ needs, be that through being able to process loan requests Lloyds Banking Group Onfido chatbots or in implementing technology to and those payment holidays in a paper- try to make things more safe and secure less way was a huge step forward. The for customers. bank could have planned for that for 12 Firstly, there was an almost overnight months and we still wouldn’t have landed that and to make the experience joined testing, all these different things are addition to being able to focus and spe - Where do you see the banking industry PG Q change in how different customers it on time, yet we had to do it in weeks. up, whether it’s starting in digital, then important because you always have happy cialise, we also have an aggregate knowl - in five years’ time? needed to interact with us and so those The customer-interface technology has handing off to human support, or contin- paths and unhappy paths, and people edge of all our customers we can bring. It’s clearly becoming a mobile experi- KT different channels had to adapt. There been crucial. But the back-office archi - uing digital straight through. stuck in the middle. How do you think You need to find those extra benefits for ence. The brands will continue; they were a number of technologies underpin- tecture required to deliver that has been through that? Having a design-first partnerships to work. Potentially, work- are going to be looked at in the future as ning our ability to manage those volumes equally important. How important is feedback along the approach to designing these flows is criti - ing with a vendor, even part time for a trusted repositories of our information. Q up and down such as the use of automa- customer journey for banks to improve cal, especially when you introduce differ- few years, can bring something to market If you think how many internet-ena- PG tion, AI and cloud. In terms of interaction, how can their levels of service? ent types of security that might be right faster than the build side of it. bled devices there will be, some ele- Q In some cases, a lot of banks have banks find a balance between digi- That ongoing feedback is imperative turns or left turns for the user. ments of banking may become more KT AB made it so good on the frontend tal and the human touch? and also helps us with fixing pain- Has the pandemic prioritised the embedded in our daily activities. That will Q It does need both, we see that from points and with research. In a digital world, How can partnerships between the development of products that are just make people’s lives better and easier. SC Q our customers and, up until now, it feedback is instant, whether it be on social incumbent banks and fintechs help to able to respond and adapt easily to But I also think that other aspects of bank- was almost seen as a convenient oppor- media or as part of the journey, and it’s deliver change? changing customer needs? ing will, in turn, become more visible such tunity for banks to close branches. imperative we continue to leverage that. I think it’s been an approach that we, We used to build a product, and you as engaging with customers to give them a PG SC Actually, this has shown we have to move You have that real-time performance at Lloyds, are seeing as increasingly took a loan and you repaid it over better picture of their financial health and PG the branch to the customer, into their data throughout your various jour- important to parts of our transformation five years or 25 years, and we saw you at helping them plan for the longer term. living rooms, into their phones, and neys. If you can see there are problems agenda, particularly as the maturity of the the end and that was it. That’s all The use of artificial that’s worked really well. within that – users getting stuck at some fintech sector has grown so much over the changed now. This is going to become a Customers will expect a seamless point in the journey – you can get in there past few years. really emerging area for us in the next For more information please visit AB intelligence (AI) as an customer experience, so combining and address it; you don’t need to wait for It can be a tense relationship at times. 12 months. onfido.com SC digital where they can self-serve should feedback to find its way through the But we both do want the same thing Also, through the pandemic, we’ve emerging technology AB they want to do so and then also integrat- organisation. and I think fintech partnerships for banks shown that we can do it, so we can has aided us hugely ing that with the human support experi- Everything we do here needs to be are absolutely critical because that is be nimble and we can react quickly. KT in helping to solve ence seamlessly, is important. If it is not tested, so we’re getting lots of feed- where most of the innovation will come. Being nimble and flexible, and able to seamless, it will create friction. So there back all the time through live behaviour. It’s very important to find areas you respond to those expectations quickly, is KT customers’ needs has to be a concerted effort to integrate This tried-and-true approach of A/B can trust third parties to work on. In going to be a competitive advantage. 6 FUTURE OF BANKING & CAPITAL INVESTMENT

REGTECH Competition in the ‘control room’

The global financial Lisa Quest, head of Oliver Wyman’s pub- Mark Turner, a managing director at lic sector and policy practice for the UK Duff & Phelps’ compliance and regulatory crisis of 2008 had a and Ireland, says: “Banks have invested a practice, says technology helps senior man- lot in compliance and risk management agers meet their responsibilities. "When profound effect on how following the financial crisis, in terms of overseeing complex organisations through both conduct risks and prudential risks. manual processes and email or verbal com- policymakers manage More recently there's been a huge focus on munications, it's very difficult for man- risk, which has led to non-financial risk compliance such as anti- agement to ensure that when there are red money laundering and counter-terrorist flags, they know where to look. Technology major changes in the financing and cyber.” cannot fix all that, but it can help to see the Banks have invested not just in human wood from the trees,” he adds. way banks insulate resources, but also in systems and technol- ogy, realising that regulatory compliance themselves against can be part of their digital transformation. major shocks David Gurlé, founder and chief execu- tive of Symphony, a cloud technology pro- vider, says much has changed. “In the past, there was an army of people making all the checks and balances to make sure the finance transaction goes through; now- Once you introduce a Stephanie Baxter adays the computer is doing a lot of this. human being in any Once you introduce a human being in any process, there is the potential for error and process, there is the he years since the financial crash eliminating that creates less friction in the potential for error T have seen banks introduce inter- cogs,” he says. nal controls to improve transpar- Control rooms have vastly improved by ency and accountability, but they still have integrating technology to increase moni- much more to do to stay on top of risk. toring of business risks and return relative Banks now have more processes to run to capital usage, according to Dr Nadia Kap- and more data to manage, and regulators pou, associate professor of finance and pro- There is now a whole range of technolo- are trying to prevent problems before they gramme director at Henley Business School. gies to help banks manage their risks and even happen. “This combined with a much more rigor- comply with regulation, while also giving “In the past, regulators would audit, ous approach to staff conduct has resulted them a competitive advantage. but never really get involved,” says Gary in a safer and more efficient financial sys- Mark Hepsworth, chief executive of Asset Wright, chief executive of B.I.S.S. Research. tem for the end-user,” she says. Control, says: “Whenever banks do some- “Nowadays, the banking community Regulatory technology, known as thing that's driven by a regulatory man- doesn't invest in or build new systems and regtech, can help banks oversee issues date, they always try and get something else processes without the regulator. The regu- that occur very quickly, such as a liquidity out of it as well, such as make the business lator is close by so they're kept informed of squeeze or compliance. more productive or improve operational what's going on.” One of the more recent post-financial crisis efficiency and take costs out." The growth in regulation has had a large regulations is a UK regime introduced in 2016 Banks can use the money saved to rein- impact on the “control room”, a compliance to make senior managers in financial services vest in other areas for future growth and and monitoring function in banks. firms accountable for their decisions. development of the business.

OPINION

‘We must draw down the full potential of technology and move from soundbites, research rooms and lightbulb moments to brave steps of action’

magine a sales and trading ease of movement of capital and liquid- of technology upon which we have only I desk being able to process data ity cross-border, is being disrupted by begun to scratch the surface. and information rapidly to not global market fragmentation. And we must begin to accept that sta- only recommend a decision but, using Already weakening profits for Euro- tionary operating models are fading data analytics and artificial intelligence pean firms are being exacerbated by a con- and an era of fluid and constantly evolv- (AI), anticipate the likely outcome and fluence of global issues, notably Brexit, ing business models, underpinned by consequences of such a step. US-China trade wars, cyber-risk, coronavi- fast-moving technology, is not dawning, It’s not quite seeing into the future, but rus and a fragile global economy that ana- but already here. certainly reduces the risk of loss, with lysts expect to decline further in 2021. Regulators have a role here too, not the chances of successful decision-mak- These evolving global issues, on top only to facilitate but to benefit. The tech- ing, as well as trade volumes, growing as of a constantly growing regulatory rule- nology that enables banks to trade with each AI decision is made. book, are pushing financial service insti- more accuracy and pace, and to identify We may not be able to predict the tutions to research, develop and inno- and prevent market abuse, can also sup- future per se, but this is certainly the vate in the technology arena to drive port regulatory authorities and super- future of the banking and finance indus- efficiency and growth. visors in foreseeing market risk and try, and where many of the major inter- But what does innovation in capital predicting economic turbulence with national capital markets firms are markets technology look like? It means greater levels of certainty. It can also bol- headed. They are investing time and automation, being data led, more agile ster defences against cyberattacks, an resources in the better use of technol- and reducing the burden that large and issue that many businesses and regula- ogy to achieve primary goals of revenue legacy infrastructure can have on effec- tory authorities have identified as one of growth, sustainability and overall cus- tive change. The latter is highlighted by their top operational risks. tomer improvements. the success of the more nimble and agile It is time technology in capital mar- The frequency of discourse where boutique advisory firms over the past kets leaves the sandbox and becomes not finance and technology intersect has ten years when their profits and market only mainstream and constant, but vis- grown exponentially over the last several share have grown materially. ible with investment and trust in that years. You cannot attend a finance-re- There is no doubt banks are investing technology bearing fruit. lated conference, virtual or otherwise, and innovating in technology and we are without a panel session or roundtable already seeing more practical uses of AI featuring fintech; governments want to in supervision and compliance where attract it and investors want to invest in it. behaviour patterns suggesting potential Generally speaking, when we hear the fraud or market abuse can be detected. term fintech, we automatically think But to really change the fate of this of new emoney lenders: the original, corner of the industry, we must draw successful fintech disruptors dominat- down the full potential of technology ing the hearts and minds of this hastily and move from soundbites, research evolving debate. rooms and lightbulb moments to brave Blockchain, distributed ledger tech- steps of implementation and action nology, and cloud are now common before those ideas, and business models, themes in the fintech debate, but the become redundant and stale. capital markets and wholesale space We must move from local test sites to has yet to see the full-scale benefits national implementation where all parts and success akin to their retail banking of the business benefit from investment counterparts. in technology. Industry will also need to Conor Lawlor Investment banking is in a state of invest in agile and fluid business mod- Director of Brexit, Capital Markets flux. Its business model, largely built els resourced with the right talent to and Wholesale, upon international markets and the navigate a new and complex landscape UK Finance RACONTEUR.NET 7 Commercial feature

Asset Control aggregates, cleanses and ing, incumbent banks have likewise expe- Seizing the moment validates the data that is fed into bank risk dited their processes to innovate and improve models. Hepsworth says failures of banks customer experience,” says Quest. such as Lehman Brothers led to a lot more MirrorWeb is a startup which enables finan- scrutiny around the quality of the data used cial firms to capture records of their website in a bold new world to understand capital risk positions. and social media communications. “One of $ BN Banks have also adopted cloud and open the key areas of concern, even pre-COVID, 1.9 source technologies. “Up until about two was digital compliance and staying account- global investment in years ago, banks were pretty nervous about able of everything being published online regtech in the first half for banking open source technology, but that's since and via social media. This has now become of 2020. Total investment changed,” says Hepsworth. an even bigger challenge due to the pan- is on pace to exceed Symphony helps reduce compliance risk demic,” according to its co-founder and chief 2019’s investment Having played a positive role in the response to the coronavirus associated with increased digital informa- executive David Clee. KPMG 2020 pandemic, banks are now presented with a one-off opportunity tion-sharing by using cloud technology. This Some banks are going further than oth- is now used by many banks and has been a ers in using technology to their competitive finally to fix their broken business model game-changer for working from home during advantage. HSBC is often called a leader in the coronavirus pandemic, according to Gurlé. embracing new technology, while Ameri- New technologies driven by artificial can banks which bounced back faster from intelligence (AI) and machine-learning are the 2008 crash have had bigger war chests to oronavirus has triggered a very above their cost of capital. The required and we are also likely to see mergers that being used in risk management processes invest in new technologies. $ BN C different crisis than the global change will manifest itself in numer- deliver those economies of scale,” says such as anti-money laundering and fraud. Clee says HSBC and J.P. Morgan have taken 76.3 financial crash of 2007-8 and ous ways. Banks will evolve their busi- Westcott. “Meanwhile, big banks need “These technologies help enhance trans- “significant steps forward” by adopting AI firms’ projected regtech banks have found themselves playing a ness model by seeking to diversify their to consider the threat posed by Big Tech action monitoring, client onboarding and and regtech solutions to help reduce financial spending by 2022 contrasting role. They have responded income away from net interest income players, such as Google and Amazon, investigation processes, which lower the crime and meet regulatory requirements. Capgemini 2019 well in their own right, overcoming sig- to generate more fee-based income, which have largely prospered through cost and time to check and acquire new cus- Standard Chartered Bank is “focusing a nificant technical and operational bar- not only driving them into new areas, the pandemic and are now looking to tomers and monitor ongoing activity,” says lot on its infrastructure and the importance riers to maintain continuity of service such as insurance, but also seeing them play a greater role in financial services. Quest at Oliver Wyman. “This can bring of data within its risk management process,” to their customers through lockdown, introduce more fees for existing prod- The industry must prepare for a financial a competitive advantage, for example Hepsworth adds. forward, while keeping the existing busi- including keeping branches accessible ucts, particularly current accounts. services world that includes Big Tech.” through faster more streamlined onboard- Banks have tended to bolt new tech solu- ness going. These issues are now starting to and contact centres going. But they have Banks will also seek to reduce their Online banking usage grew by a fifth ing of new clients.” tions like AI or blockchain onto their legacy be tackled and COVID-19 is helping to drive also been fundamental in facilitating the costs further and ramp up their digital during lockdown, while mobile banking When the digital-first neobanks entered systems without taking a holistic approach, this,” says Wright of B.I.S.S. Research. government’s emergency loan schemes transformations. This is likely to acceler- and video chat usage increased by 21 per the UK market, they could onboard cus- but the COVID-19 pandemic has spurred Technology is revolutionising the bank- and mortgage payment holidays. ate what has already been seen in recent cent and 19 per cent respectively, accord- tomers in a fraction of the time on their banks to re-evaluate all their systems and ing sector. Banks that use it, not just for com- Where banks will find common years in terms of branch closures, job ing to research by PwC, which also antic- mobile devices. technology tools. pliance and meeting regulation, but also to ground between the global financial losses, more automation and the con- ipates an acceleration in the shift to digi- “By introducing sophisticated regulation “Banks need to have a development strat- improve their businesses for the benefit of crisis over a decade ago and the pan- tinued demise of cash and cheques. tal payments. In the next 18 months, cash technology to automate compliance check- egy or plan of what they want to be going their customers, will thrive in the future. demic is in the inflexion point each Customers will interact with their banks payments will decline by 21 per cent, PwC one signalled in the need to overhaul differently, characterised by an even predicts, offset by a 25 per cent uplift in their business model. Banks knew after greater shift to digital channels, such as mobile payments and 16 per cent in cus- the 2008 market crash that they had video, mobile apps and live chatbots. tomers paying by an digital wallet. OPINION to rebuild their balance sheets and “The pandemic has crystallised the Government and regulators have embrace technology to transform how fact that the traditional retail banking previously discouraged banks from they interact with consumers. business model in the UK just doesn't closing branches, particularly to main- Having put the foundations in place work anymore,” says Simon Westcott, tain a strong customer experience for since then, the pandemic now creates partner in PwC's Strategy& practice. elderly, rural or vulnerable customers the imperative to accelerate their busi- “Retail banks are now in a structur- who may struggle with the transition to ness model and digital transition. digital. COVID-19 has the potential to “The pandemic has presented banks change that. with an opportunity to be part of the Attending a branch is now a much solution and they have truly grasped it,” less attractive proposition for anybody, ‘Fintech was born in the says Isabelle Jenkins, partner and UK not least vulnerable people who, as we banking leader at PwC. “They deserve enter winter, will potentially have to credit for the role they’ve played and leave their homes in the cold weather to last crisis and it is primed the speed with which they put in place The pandemic has line up outside the bank, due to social the various government support mecha- crystallised the fact that distancing measures, and withdraw cash nisms, providing crucial breathing space that has been widely handled. to help in the current crisis’ for customers and small businesses." the traditional retail Such a customer experience is poor “Their efforts should go a long way banking business model even before considering the risk of towards helping to further restore virus transmission, flipping on its head trust and the reputation of banks. That in the UK just doesn't the notion that banks must not leave doesn’t, however, mean they’re not work anymore vulnerable customers behind by clos- facing challenges.” ing branches. The sheer necessity of Given banks are much better capi- the moment presents a window of intech was born in the wake of An area in which fintech has seen sion-making. Their use of new data talised than before the 2007-8 finan- opportunity for banks to accelerate the F the last economic crisis. It is particularly strong growth, and one analysis technology combined with cial crash, they are well placed to cope shift to digital platforms and channels ready to help in the present cri- where it stands to make a big impact machine-learning and artificial intelli- with the immediate impact of this at a time when people are most recep- sis and to power lasting growth. in the recovery, is SME financing. Pro- gence means they can process large vol- crisis in terms of impairments and fall- ally low-margin industry. They need to tive and in need of these changes. The global economic crisis caused tecting the future of SMEs has been umes of requests from SMEs much faster ing revenues. accept that reality and look to operate “Banks must seize the moment and by coronavirus is already drawing front of mind for government and busi- than traditional players. What the pandemic has done, how- and think in a different way.” go further and faster in their digital comparisons with the 2008 recession. ness alike. Fintech lenders have cer- Fintech lenders already have relation- ever, is diminish any hope of an end to With margins low and growth pros- transformation than they might oth- Though the causes are very different, tainly played their part in disbursing ships with more than 500,000 SMEs in the ultra-low base rates and even raises pects limited, economies of scale also erwise have been brave enough to do,” we can foresee the same fallout: credit the lifelines of CBILS (Coronavirus UK and it’s clear they have a huge role in the prospect of negative rates. Low become more important. A wave of con- says Westcott. “They know they still drying up, small and medium-sized Business Interruption Loan Scheme) supporting small-business financing. The interest rates have placed a signifi- solidation is expected to undo much of need to have some person-to-person enterprises (SMEs) struggling and the and BBLS (Bounce Back Loan Scheme) speed and flexibility of these innovative cant drag on their profit margins over the fragmentation that took place after contact with consumers, particularly most vulnerable in society put in a pre- to small businesses. lenders is what sets them apart. The way the last decade, and the business the last financial crisis. This has already the vulnerable, but a much better cus- carious position. They have an equally important role they can support SMEs in need now, and model they’ve relied on – monetising begun to be evident elsewhere in Europe, tomer experience would be providing Happily, we have made progress in in providing the capital to keep SMEs, power those who are looking to take advan- the spread between what they pay on where regulators are taking more of an a tablet, training customers on how to our ability to handle these issues. The the very backbone of the UK economy, tage of growth or starting a business in the deposits versus what they charge for enabling than obstructing stance. use it and broadcasting an agent into advent of fintech is a particular high- growing and succeeding. SME financing wake of COVID, will be absolutely vital for loans – is no longer viable. “As the business model strength of dig- their home via video to carry out their light. The fintech sector, which finds has been an issue for many years. A lack the long-term strength of the economy. Without substantial change, retail ital-only neobanks is put to the test, big banking services. its roots in the 2008 Great Recession, of access to credit for small businesses is The speed of our recovery will in a banks will struggle to deliver a return banks will spot acquisition opportunities, “If banks are slow to respond, and on has grown with a stated aim of tack- endemic in the UK and it has held back large part be determined by the for- the other side of the crisis things return ling those very problems which head- the ambitions of entrepreneurs. tunes of SMEs. The more tools and the to a previous status quo, they’ll have lined that crisis. Since then, fintech Recognising this, a cadre of innovators more options they have at their disposal BANKING AND CAPITAL MARKETS TRENDS 2020 missed the chance. has flourished and is now delivering have built new digital-first businesses to support their financial situation and “Meanwhile, rather than hinder innovation across the full spectrum of designed to meet the financing needs of to achieve their goals, the better. COVID 19 has acted as an accelerator to many existing priorities for Banks. When asked in banks in that transition, government financial services. SMEs. Challenger banks and alternative We have seen the potential for fintech to PwC's 23rd Annual Global CEO Survey which of the following opportunities in the financial and regulators need to support them Current accounts, savings, invest- lenders, such as Starling, iwoca, Funding power growth for a number of years. Now services industry will you be prioritising and/or investing in over the next 12 months B&CM and see the positives. Once customers ments, insurance, foreign exchange and Circle, OakNorth, Tide, Capital on Tap is the time for it to really make its mark and CEO's responded as follows: get through the transition, which may payments have all been disrupted by fin- and Atom Bank, have all started since to show it is a critical part of our economy. be difficult for some, we can look for- tech providers. So too have the core infra- 2010 with the aim of disrupting the SME ward to a much better and safer cus- structure of banks and banking systems, lending market. tomer experience, and a more sustain- helping to improve efficiency across the This new breed of lenders are smaller able banking sector because its cost sectors players, old and new. There is a and more flexible than bigger banks, base has been right-sized for the eco- strong base on which the sector can build. which means they can cater to SMEs nomics of retail banking as it exists now Fintech was born in the last crisis and it is more readily and are armed with new 72% 49% 39% and into the future.” primed to help in the current crisis. technology to allow speedier deci- www.pwc.co.uk/industries/ banking-capital-markets.html

Customer Cybersecurity Core technology experiences transformation SMEs in the UK currently have (including user relationships with fintech lenders Charlotte Crosswell interfaces) CEO, Source: PwC, 23rd Annual Global CEO Survey 500 Innovate Finance 8 FUTURE OF BANKING & CAPITAL INVESTMENT Commercial feature

Financial institutions embrace multi-cloud to accelerate innovation CAPITAL MARKETS

Pressure is mounting on financial services firms to adopt new business models, but doing so requires a customer experience that can only be Volatility powered by true agility and innovation on the path

stablished financial services Scalability and cost efficiencies incumbents to compete. It can be a E companies have long had to are principal motivators of cloud multi-year undertaking, but technol- balance the running and oper- adoption, but as companies become ogies such as AWS Serverless are pro- ating of legacy systems, some of which more sophisticated they also see the viding organisations with a portfolio of to innovation still run code originally developed 40 value around innovation. The likes of services to deliver on this, as fast as the years ago, with the digital transforma- Starling Bank and Monzo have been bank can adopt change.” tion of their IT estate and wider busi- able to innovate at speed due to their The model emerging as the techni- ness. Coronavirus may have acceler- cloud foundations. And with Microsoft cal environment of choice in this new ated acceptance and development of Azure providing cutting-edge tech- world of banking is multi-cloud. While net new digital, but many organisations nologies such as artificial intelligence, hybrid cloud typically meant a work- Coronavirus has Oliver Pickup have still had to rethink their tools, pro- machine-learning and the internet of load that could run in many places, a cesses and operational models. things, coupled with the Azure Cloud multi-cloud model allows workloads disrupted all sectors The pressure to modernise and Migration Framework, cloud is also to be moved between any clouds in an f you were to create a word cloud to “On the sell side, broker-dealers and improve customer experience has been fuelling powerful innovation for others environment, depending on what is the of the economy, not I describe capital markets in 2020, investment banks have seen significant vol- exacerbated by the rise of neo-financial in the financial services sector too. most optimum platform at any given most prominent, in large, emphatic ume decline, mainly due to obsolete leg- institutions born into a cloud environ- The pandemic has all but confirmed time. This could be influenced by tech- least capital markets, capital letters, would be VOLATILE. acy systems that were driving down mar- ment that gives them a natural advan- that interest rates, having been near zero nical functionality, but also a commer- but it has also created At the start of the year, the most con- gins. Almost all large investment banks tage when it comes to agility, scalability since the 2008 global financial crisis, will cial relationship. cerning aspect for those involved in capital are investing in digital, mainly for improv- and innovating at speed. Some incum- not be anything other than ultra-low in Across processes, applications and opportunities for markets was the UK’s exit from the Euro- ing customer and employee productivity, bents have responded faster than the medium or even longer term. This technologies, Reply addresses the pean Union. There remains an uncomfort- cybersecurity and rethinking talent.” others, creating digital islands or even means the traditional business model main core issues of the financial ser- innovation and growth able amount of doubt about how Brexit will Predicting more development in this new operating companies to own inno- of retail banks, their net interest margin, vices sector, fostering success through play out, with traders and business lead- area, he adds: “It is widely anticipated vation and drive the shift to new ways of is hardly viable if they do not search for the introduction of innovation along ers alike looking longingly towards Brus- traditional investment banking will get working and more continuous delivery additional revenue streams. the whole economic digital chain. In sels in the hope of a favourable outcome of broken down to specialist investment of updates and features. While retail banks will continue to the area of multi-cloud IT environ- negotiations before the transition period banks that focus on deal origination and New research by Reply and Imperial lend, they also urgently need to find ments specifically, financial services ends on January 1. utilities that will perform middle and College London, based on interviews new ways to create customer value. organisations benefit from the deep November’s American presidential elec- back-office functions.” with executives at financial institutions, In this age of social media and inter- relationships that Reply has developed tion had long been circled as a time when Another trend identified by Krishnan cloud services providers and regula- connected application programming at the highest levels with the leading the capital markets might play bull or is the evolution of data providers, who tors, found that though cloud adop- interfaces, or APIs, neobanks that cloud vendors and platforms. bear. But then, in March, came the world- play a “critical part of our capital mar- tion is evolving rapidly, the deployment have spent the last few years creating Though multi-cloud is an enabler of wide spread of coronavirus. The pandemic ket activity as we know it”. He says: models and extent of adoption are an excellent user experience for cus- agility and innovation for financial insti- has touched every aspect of our lives and “Traditional buyers rely on the likes of influenced, broadly, by four key factors. tomers online are already now testing tutions, particularly those seeking new infected all sectors and their markets. Slack and Bloomberg for trader com- “Firstly, they vary geographically,” and even releasing new kinds of prod- business models, it does also introduce This extreme volatility has acceler- munications and buyers are directly says Freddy Gielen, executive partner ucts they can generate revenue from. a number of challenges around how to ated innovation to reduce risk, maxim- sourcing data from the market or bou- at Reply, which supports industries migrate to, operate and govern such ise returns and improve resilience for gov- tique providers. A variety of capital mar- including financial services in design- an environment. Companies with large ernments, large financial institutions and kets-focused fintechs are also coming ing and implementing innovative solu- legacy estates will run into common traders. And driving the necessary evolu- of age and establishing niche models tions and developing new business challenges, including billing, costing, tion of the architecture of capital markets in the field of Libor [London inter-bank models. “For example, the UK’s regula- availability, disaster recovery, security is technology. offered rate] pricing, artificial intelli- tory stance is more cloud friendly than, classifications and data locations. “Capital markets have had a tough year say, countries in the Middle East, so the “Manoeuvrability is very important, in 2020, mainly as a result of the corona- location where an institution resides Reply helps companies but managing a multi-cloud environ- virus pandemic, with COVID-19 rates ris- majorly impacts acceptance.” get the best out of each ment, for a short-term business initia- ing and the prospect of a third shutdown The second factor is defined by the tive or as part of a longer, multi-vendor across the world now apparent,” says sub-segments of the financial industry. cloud product, but also strategy, still has its headaches and pit- Sankar Krishnan, executive vice president Asset management firms, for example, falls,” says Gielen. “As a premier part- of capital markets and banking at Capgem- generally find it easier to adopt the maximises the benefits ner with Google Cloud, Reply’s clients ini. “Looming fiscal cliffs caused by shut- cloud than those in wealth manage- of everything wrapped can leverage the value of open stand- down, continued virus uncertainty and the 50+ ment where there are stronger con- around a multi- ards like Kubernetes and TensorFlow US election impacting global politics are all Acquisition vehicles cerns about data privacy. along with multi-cloud management added to the mix.” over the last 5 years Thirdly, banking incumbents will nat- cloud environment, products such as Google Anthos. Against this backdrop, though, several urally approach it differently than neo- “Reply helps companies get the best key trends have emerged and they might banks that were built in the cloud. And including automation, out of each cloud product, but also remain for some time. For one, there are finally, idiosyncratic factors also have an performance and maximises the benefits of everything new products and terminology. “We never influence. Though two financial services wrapped around a multi-cloud environ- before heard of terms such as ‘COVID companies may say they adopted cloud security ment, including automation, perfor- stocks’, ‘work-from-home stocks’, ‘return- technology, one may have done so only mance and security. With a number of to-work stocks’ and few people had come for development and testing while the our clients, we've iterated that forward across special purpose acquisition compa- other migrated core applications. into a cloud management platform nies or SPACs,” says Krishnan. “Size also plays a big role,” says that can essentially manage from one There has been substantial growth in Professor Nelson Phillips of Imperial place what's happening across multi- SPACs, whose main objective is to raise College Business School. “If you’re To compete, incumbent banks must ple cloud vendors. Our commitment capital through an initial public offering to $2BN+ a large incumbent bank with several also create an agile and innovative to open source and being able to build acquire companies. In September, SPACIn- Raised by acquisition clouds, public and private, dealing with environment that enables their people portable applications that can run on sider reported there had been $36.2 billion vehicles since 2017 different providers, you're much fur- to find new ways of making money. any of those clouds is also very strong, in SPAC proceeds so far in 2020, almost ther along because the drivers in terms “One way of tapping into new busi- as well as supporting where each of the three times greater than the whole of last of efficiency and scale are really impor- ness models is to grow the premium cloud vendors might specialise.” year at $13.6 billion. tant. If you're more of a regional bank in customer base, who pay monthly fees, However, private equity firms closed a single European country, the drivers but to deliver new services and a pris- For more information around 30 per cent of deals in the first are less straightforward. tine customer experience, incum- please visit reply.com/cloud-fs half of 2020 compared to the same period “Just moving things to the cloud is not bent financial institutions need to be last year, says Krishnan. “This is expected 30% entirely sensible. You first have to clean able to match the cloud-driven agility to continue for the rest of the year,” he Increase in market value of up the data and think about your soft- of their neobank rivals,” says Gielen. says. “That said, mergers and acquisitions 2019 acquisition vehicles IPOs ware and how you're going to do it. It's “Modernising the mainframe is a activity continued to be strong as valua- not just lift and shift; it's lift, fix and shift.” common roadmap item that enables tions dropped. SPACInsider RACONTEUR.NET 9 Commercial feature Shutterstock, ABIR ROY BARMAN ROY ABIR Shutterstock,

A revolution in open finance Approximately two million individuals already use open banking-based services, which are available from over 200 providers. As customers’ digital expectations grow, there is a powerful opportunity for businesses to deliver a much broader set of connected financial services

ser experience has been at equally active role in enabling and U the heart of recent progress encouraging the development of this in how financial services are new landscape,” says Muis. “They have delivered. Open banking allows account empowered massive change in open holders to share financial data securely banking and now is the time to engage with, and initiate payments through % widely on open finance. There will need a range of useful apps and personal- 47 to be further consultation and testing, Oliver Pickup gence-driven bond pricing, fixed income When assessing the characteristics ised services through application pro- and the right framework, so the ground analytics and so on.” of global capital markets that demand gramming interfaces (APIs), and since is laid for quick progress - especially believe open banking enables Michael Voisin, global head of capital unique technical architecture, Walker says: its launch in 2018 expectations of what given consumers’ pressing needs and markets practice at law firm Linklaters, “Remote working combined with a signifi- can be delivered have heightened. them to deliver better expectations that have arisen during says: “Capital markets are in a good state, cant shift towards capital formation within While open banking has already customer experiences the pandemic.” both globally and regionally. They are What is clear is we can’t the private sector have driven a need for transformed what banks and financial A key strand of regulators’ efforts, doing what they are designed to do: provid- stay as we are new architectures that allow for the facilita- technology companies can offer, cus- Muis explains, will be empowering third ing cost-effective financing to businesses in tion and global accessibility of asset types tomers now expect more: they want a party open finance providers such as need of it. not accessible through traditional central powerful experience that puts them YTS to build and test solutions, engag- “The enduring benefit of the capital market infrastructures.” at the centre and reflects their entire ing with them as a core part of ensur- markets is their ability to provide deep And it is here where blockchain, the financial life. ing the necessary conditions are in liquidity for large fundraisings at the financings,” he says. “And we have seen a immutable ledger underpinning bitcoin and Given the vast societal impacts of 22% place for the ecosystem. “Given the most competitive rates.” As an example, raft of ESG issuance across the world, such hundreds of other cryptoassets, can play the Covid-19 pandemic, such an expe- costs and time needed for develop- he points to the European Commission’s as blue bonds in Asia to support ocean-re- a pivotal role. “The digitalisation of such rience will need to be delivered digi- ing open finance systems, it is essen- recent bond issues, which raised €17 bil- lated environmental programmes.” assets and representation of those assets on tally, and financial services providers cite the potential for more tial that third parties can progress and lion and carried negative interest rates, Angie Walker, global head of capital distributed ledger-based technology is vital must offer reliable, useful, relevant and robust transactional and share their experiences as a priority, so so investors were willing to lose a small markets and banking at software firm R3, to allowing this to grow exponentially, in a easy experiences at all times. information security the technology is made available more return on their investment in return for believes blockchain technology and dig- way that centralised infrastructures, such These pressures mean there is a quickly for customers and the entire capital protection. “There was investor ital assets “will play a fundamental part as regional stock exchanges, would not have need not just for open banking, but industry,” he adds. demand for €233 billion, so they could in collateral optimisation, risk mitiga- addressed,” she says. for open finance. This will address the In the UK, such change is moving have sold almost 14 times more bonds tion and driving much greater efficiency Offing a final piece of advice to those complete picture of a person’s use third expect increased revenue, and ahead. In October 2020, the Financial at that price than they were seeking to through vast simplification of otherwise operating in capital markets, Walker of money, from pensions and invest- 27 per cent cite the potential for more Conduct Authority (FCA) closed its raise,” says Voisin. over-engineered and unnecessarily com- adds: “What is clear is we can’t stay as ments, to insurance, mortgages and robust transactional and information broad call for input around open This year he has spotted a jump in financ- plex processes”. we are. Yet for the braver, nimbler and beyond. Customers will expect these security. These benefits are set to be finance - having attracted detailed ing for environmental, social and gov- Suggesting that capital markets are “in a more pioneering industry providers, the services to be delivered instantly, on turbocharged when the scope of open comments from myriad finance and ernance (ESG) purposes, and is pleased transformational state”, she sounds a note opportunity to leverage digital innova- the web and on mobile apps. banking widens to include the whole technology providers. There are likely governments are helping in this area. of caution. “It is evident that much has to tion to drive true greenfield growth is “Open finance will allow customers financial system. to be some areas where foundational “Fundraising for the pandemic has included change and the growing tide of regulatory immeasurably large.” to manage all of their personal finances The research also confirms that steps will be required: the YTS survey government-supported schemes, such as obligations around risk, capital adequacy In such uncertain and volatile times, these in one place, giving them a complete the pressures brought by Covid-19 to has shown already that a quarter of the Bank of England’s COVID Corporate and reporting is going to continue to fuel words envisioning a brighter, tech-powered and holistic view of their entire finan- deliver a new level of digital services industry executives do not yet under- Financing Facility, as well as longer-term that,” she says. future serve as a welcome balm. cial footprint, as well as access to mean most institutions already offer- stand that open banking gives consum- faster, cheaper credit and personalised ing open banking will continue to do ers complete control on data access. advice,” explains Leon Muis, chief busi- so, with a significant number of others In addition, there are problems around ness officer at Yolt Technology Services looking to enter the arena. aligning information from different Statista 2020 CAPITAL MARKETS ASSESS THEIR APPROACH TO ADOPTING NEW TECH (YTS). In practice, open finance could But for open banking to progress businesses in multiple formats, and Investment banking professionals rate their approach to the adoption of data and analytics, cloud computing, Artificial Intelligence, and Distributed mean customers rapidly accessing more properly into open finance, there around sluggish update times by some Ledger Technology over the next 5 years. relevant and affordable products, or remains a technology development providers on their system interfaces. better managing the portfolio of their and integration challenge ahead, Muis “It is important that regulators 4% investments and debts, for example. warns. “Financial services providers in help with some of these founda- For the financial services indus- all areas are trying to find the best way tional aspects, creating a clear defini- Limited and try, the opportunities are abundant. to create such a service so they can tion of open finance and its security, ad hoc A survey of over 1,000 sector profes- reap the promised rewards,” he notes. and establishing a set of principles to 14% 24% sionals by YTS found that 47 per cent However, for most companies, building ensure data alignment and excellent Advanced Basic and steady believe open banking enables them to an open finance service from scratch interfaces between all the finance firms and leading deliver better customer experiences, would be extremely costly and take and technology companies,” explains in part from the powerful insights several years. Muis. “Getting this right is extremely derived. Almost the same number are “Faced with such a project in these achievable considering the strong will seeing improved efficiency, while a conditions, most financial services of the industry and the existing founda- companies will have to look for another tion of open banking, and is imperative route, turning to third party provid- considering the needs of customers.” ers that have the scalable and efficient Given the success of open banking, systems to quickly make open finance a as open finance goes ahead there is profitable reality for them, no matter the enormous potential for financial and size of their business,” says Muis. “This technology businesses to transform will be no surprise as it goes to the heart their growth, while revolutionising the of open finance, with its imperative of services they provide. Open finance will allow using powerfully-interfaced technology to deliver all-round benefits.” customers to manage A proper ecosystem between pro- To find out more about the open % all of their personal viders will be needed if open finance finance revolution, visit yts.yolt.com 58 is to become an efficient reality. The Ambitious and finances in one place, dedicated progress of finance firms developing and technology companies is expected giving them a complete to go a long way towards achieving this, and holistic view of their but will not be enough on its own. “Financial industry regulators entire financial footprint around the world will need to play an 10 FUTURE OF BANKING & CAPITAL INVESTMENT

GLOBAL OUTLOOK

London’s not shomos uddin / Getty Images done yet

The EU referendum Oliver Pickup may be a distant ill it be a happy new year for the need to be finalised, though Bank of Eng- considerable progress in view of this £1 trillion of assets out of the UK and However, James Butland, vice president memory, but as the W UK banking sector? When the land governor Andrew Bailey has been event.” Mersh adds that most are “on track into the EU because of Brexit. US lender of global banking at cross-border fintech Air- transition period of Britain’s exit warning the largest UK lenders to plan for to finish their preparations” this year, but JPMorgan Chase & Co., for instance, is wallex, argues the “mass exodus” from London end of the transition from the European Union ends on January a no-deal Brexit since June. others “have much work to do”. expected to shift around £180 million “has not happened to the extent so many were 1, business leaders and bankers alike will Legally, there will be changes on a For the latter, the coronavirus fallout has in assets to Germany. Further, it has sure it would”. He says: “London remains an period approaches, tiptoe into a post-Brexit reality. Enmeshed global scale. “As of January 1, banks disrupted post-Brexit plans. “Broadly speak- ordered 200 staff to move out of Lon- attractive place where people want to live and by confusing and in some cases yet-to-be- located in the EU and the UK will have ing, the main priority for banks over the past don to other European cities including work. Equally, the ecosystem in London is truly global banking hubs are determined rules, they will enter a new to operate in two separate regulatory and few months has been tackling the multi-fac- Paris, Milan, Madrid and Frankfurt, in global, like New York or Hong Kong, and has gearing up for a post- global banking landscape. supervisory environments,” says Yves eted consequences of the pandemic,” he says. the expectation that the UK and the EU always been regarded as a crucial financial hub. But given that financial institutions inside Mersch, a member of the European Cen- Indeed, the “C” word has obscured will not firm up an agreement on finan- “The UK has always been, and continues Brexit world and outside Europe have been preparing for tral Bank’s executive board. “Providers of the “B” word since March, and although cial services. to be at least for now, a world leader in finan- this day since the EU referendum on June 23, financial services between the EU and the COVID-19 may be a reason for the sluggish Considering the UK exports more than cial services, eclipsing many of its EU rivals 2016, will things be markedly different? UK will no longer enjoy the benefits of the progress of Brexit negotiations, it is not an £26 billion in financial services to the EU, across the sector. And despite uncertainty Whatever happens, British banks and single market. excuse for banks to be ill-equipped. Many according to the Office for National Statis- around Brexit, one thing is clear: Europe their European counterparts have had “Many euro-area banks doing business big players lined up their moves long ago. tics, perhaps the global post-Brexit bank- will remain a leader within the global bank- enough time to ready themselves for post- across the Channel, as well as UK banks EY calculates that banks and fund ing landscape may transform quicker if ing industry, mainly due to the strength of Brexit life. Admittedly, some details still operating in the euro area, have made managers have committed to moving no deal is reached. the euro as a currency.”

Commercial feature

Erin Platts Bradley Riss Nicole Sandler Head of EMEA and president of the UK branch Chief commercial officer Head of digital policy Silicon Valley Bank Checkout.com Barclays Fintech’s next chapter: innovation through collaboration

terms of both domestic and international look at it as how to facilitate the journey you You always have to ask, is your regulation As the relationship NS capital funding has created huge momen- want to create for the end-customer. fit for purpose? If certain players are not Bryony Widdup between fintechs tum. Even with the COVID-19 headwinds, Sometimes it might be by flying solo, but more regulated, we know what could happen down Partner DLA Piper there has been phenomenal performance, often than not it's through collaboration. the line. Regulation should follow a very simple and incumbent banks though it has driven some bifurcation, with When thinking about the integration principle: if you do the same activity and you EP becomes increasingly capital and liquidity harder to come by for between fintech and financial services, have the same risk, you should follow the same certain businesses. we often defer to the consumer angle, but regulation. If everyone had the same regula- industry bodies to develop standards in those have to make sure we hold on to it and foster COVID-19 has definitely shown how there is also a huge infrastructure and effi- tion proportionately, it would help the eco- scenarios. We're getting to a point now where it, and that our market can work with other collaborative, four NS important digital is, but it is really impor- ciency play. I think sometimes we underesti- system, financial stability, competition and, we’re beginning to see better support by more markets. We don’t want the UK to be a great experts from the financial tant not to have a knee-jerk reaction. Financial mate the impact fintech can have on infra- ultimately, the consumers and investors. centralised regulation, which should move the place to do business, but solely in the UK and uncertainty has the potential to change habits structure transformation for large One of the big drivers of fintech in the industry forward. not other jurisdictions. If we want to grow EP services industry across all society in looking for technological institutions, keeping them compliant and UK has been the regulatory sandbox. talent within the UK, we have to start at the “safe havens”. While this may hasten some of reducing costs. Now other jurisdictions are increasingly inno- As we look to a post-COVID world grassroots level. meet around a virtual Q the debate and support for certain technolog- It's really important for value creation, vative, how can we ensure we stay at the lead- and a Brexit Britain, what is the There are a number of initiatives now BW BW roundtable to discuss the ical use-cases, there still needs to be a meas- throughout the whole of the financial ing-edge so we're not just attractive locally, future of fintech? around STEM [science, technology, ured and strategic response. services sector, that the architecture and but also supporting companies that start here We have all the ingredients in the UK engineering and maths] and pushing people EP evolution of the sector Customer centricity is really important. structural piece can be improved, replaced to compete globally? I do buy into this concept around access to talent and we need to towards more employment in technology, BR More broadly, there's a generational in parts and brought forward, both for cost of proportionality. If we can get it right, we will make sure that’s front of mind with respect but there is a lot of catch-up work to do. I'd change. Big banks were viewed as incredibly and time efficiencies, but also in terms of the create better consumer outcomes and more to Brexit. We have increasing levels of domes- also like to see much more done around trusted going back 30 years, but the global risk angle. There can be real improvements of a level playing field. tic capital and huge amounts of interest ensuring that home-grown pool of talent at financial crisis opened the door to new made through collaboration. There is great value in a balanced internationally in terms of scale. Success the very early stages is truly diverse. Then, BR What trajectory have fintechs been on entrants into what were traditionally very People often ask, why is it so difficult approach. The Monetary Authority of between fintechs and the larger established when they come through the education Q NS and what impact has the coronavirus protected spaces based on the perception of for some firms, including incumbents, Singapore and the UK’s Financial Conduct financial institutions is about creating the system in the next five to ten years, we have pandemic had on them? consumer trust. There's also been a conver- to collaborate? Legacy systems would have Authority alike have been very encouraging to bridge of talent both ways and removing fric- ever-increasing diversity in the financial ser- Fintechs have evolved over a long gence with technology enabling these new been a key reason in the past, but often, fintechs and they're being rewarded by tion from the process of partnering. vices sector. BW period, but the global 2008 financial business models to flourish. nowadays, startups will find solutions for attracting some of the best companies in the COVID is a stress test and markets are BR crisis really kicked off the transformation of that. For me, it's been more about legacy world. But equally there are some jurisdic- cyclical. The UK is very well positioned. I the financial services sector by allowing out- How has the relationship between fin- thinking, though that is changing too. People tions where the standards are too low. This don't think Brexit necessarily is going to For more information please visit Q siders in. More recently we have seen fin- techs and more traditional players in have, in their mind, ways they should do creates distrust and a lack of willingness from impact that at all. From a cultural perspective, www.dlapiper.com/sectors/financial-services techs shift from being outsiders to more the financial services ecosystem evolved? things and who they should partner with. We other actors in the ecosystem to work with people like the UK. It has that existing talent mature companies engaged with all aspects In payments, companies like Visa and have to collaborate because many of our organisations that don’t have a hygiene factor. base and it now has an existing hub of fintechs. BR of financial services. There's been huge Mastercard have approached innova- challenges impact the industry as a whole. The fintech industry has generally There's so much innovation already in place. BW growth and a lot of learning along the way. tion as an ecosystem. They don't necessarily sought standards, including in a There's a reason why we chose the UK and why The diversity of fintech companies have to own innovation themselves, so long as The regulatory landscape in many ways self-certified manner when external stand- a lot of other leading fintechs do too. EP Q being produced and scaled in the UK they can help foster it, and some banks are has helped fuel the rise of fintechs, but ards are not available or regulation has not Access to talent is super important. We NS has evolved substantially. The support in starting to emulate that approach. It’s best to how are we now seeing this change? adapted sufficiently. There is a need for may have a lot of talent now, but we RACONTEUR.NET 11

MONTHLY MARKET CAPITAL VALUE OF EUROPEAN STOCK EXCHANGES SINCE THE CORONAVIRUS OUTBREAK

Market capitalisation in billion US dollars Euronext London Stock Exchange Deutsche Börse SIX Swiss Exhange NASDAQ Nordic and Baltic Exchanges Moscow Exchange BME Spanish Exchanges

6,000

5,000

4,000 Hate giving up

3,000

2,000 your data for

1,000

0 Dec19 Jan20 Feb20 Mar20 Apr20 May20 Jun20 Jul20 Aug20 bad content?

Statista 2020

But Butland says ”a new leader needs to pre-existing ecosystem of financial insti- UK fintechs to serve European customers take London’s crown” within the region. tutions and suppliers, the vast majority of from the UK, is also not clear and won’t He continues: “The European banking which will remain in the UK.” be until the final deal is negotiated.” community may start to face geographical Professor Brian Scott-Quinn, director of Butland concurs that 2021 will be pivotal in fragmentation, as the position to become banking programmes at Henley Business shaping the global banking landscape. “The the epicentre of the eurozone opens up. School, is more cautious and believes the next 12 months will certainly be interest- Email* The race to become the financial capi- global banking landscape has been frag- ing, as both the pandemic continues and the (required) tal of the EU seems to be between Paris, mented since the 2008 financial crash. repercussions of a potential Brexit deal loom Frankfurt, Brussels and Amsterdam, with “Just as trading relationships between ahead,” he concludes. “Whatever happens no winner yet in sight. Wherever this loca- the major blocs – the US, Europe and over the coming year, disruption lies ahead. tion may be, it should look to London China – have been damaged in recent Financial institutions will be making contin- to continue Europe’s legacy as a leader years, as well as the relationship between gency plans for every possible eventuality.” within the global banking economy.” the UK and the rest of Europe, so globali- sation of banking and finance has been in low gear now since the financial crisis,” NUMBER OF COUNTRIES OF he says. “Most UK banks that had plans OPERATION FOR SELECT EUROPEAN for internationalisation or for building ONLINE ONLY BANKS WORLDWIDE up their investment banking capabilities have since abandoned such plans.” Statista 2020 Regardless, Holt argues the pandemic The UK has always been, is more of a threat to the sector’s future. 36 30 25 “COVID-19 is clearly a worry, more so and continues to be at than Brexit,” he says. least for now, a world leader Chris Ganje, chief executive and co-founder of Cardiff-based fintech Your in financial services AMPLYFI, which focuses on develop- ing artificial intelligence for banking, expands upon this theme. “The bank- ing sector should have already dealt with Brexit over the past two years with robust Alastair Holt, financial regulations models in place to move on,” he says. “The partner at global law firm Linklaters, fallout of COVID-19 is a major unknown. prospects agrees. “Other European cities will not For example, any FCA Section 166 notice be as influential as London, at least in the into how a bank handled crisis-related short to medium term,” he adds. “Lon- loan applications could cost it tens of mil- don can play a critical role in bridging the lions of pounds to review.” East and the West, particularly given the Additionally, Alessandro Hatami, increasing tensions we have seen between co-author of Reinventing Banking and the world superpowers in those regions. Finance, says it is hard to quantify the certainly do. “The UK will still be a leading global effect of Brexit right now. He points out: financial centre, boosted by its language, “The impact of leaving the EU financial time zone, the legal system, and the passporting scheme, making it harder for Revolut Bunq N26 So many lead gen campaigns fail because the content behind the data capture offers no value, causing frustration Commercial feature and negative brand sentiment. The lead gen campaigns we run for brands are based around high-quality content that answers a need.

Erin Platts Bradley Riss Nicole Sandler Head of EMEA and president of the UK branch Chief commercial officer Head of digital policy Silicon Valley Bank Checkout.com Barclays

Brexit and COVID-19 COVID-19 had “drastically increased” intensive tasks, such as setting up Find out how Fintech’s next chapter: the speed of change in banking from an account or applying for a loan. accelerate move to digital years to months. Edwards says: “As an example, TSB The UK European Union Max Chuard, chief executive of implemented digital signature membership referendum was Geneva-based banking software technologies using Adobe Sign we can help you innovation through collaboration inevitable when David Cameron fintech Temenos, says: “Uncertainty to allow customers to carry out won the 2015 general election, is a catalyst for innovation. The important processes from their own having promised a plebiscite during 2020s were already set to be home, moving over 15,000 account his campaign. Coincidentally, 2015 the decade for digital banking sign-ups that would normally require make the most terms of both domestic and international look at it as how to facilitate the journey you You always have to ask, is your regulation was when branchless challenger transformation, but now the a trip to the branch.” As the relationship NS capital funding has created huge momen- want to create for the end-customer. fit for purpose? If certain players are not Bryony Widdup banks Monzo and Revolut were coronavirus crisis has accelerated That convenience will be between fintechs tum. Even with the COVID-19 headwinds, Sometimes it might be by flying solo, but more regulated, we know what could happen down Partner founded, with Starling Bank this process. It has made the need central to winning customers, says DLA Piper and incumbent banks there has been phenomenal performance, often than not it's through collaboration. the line. Regulation should follow a very simple launching a year earlier. for advanced banking technologies, Aaron Archer, founder and chief of your leads. though it has driven some bifurcation, with When thinking about the integration principle: if you do the same activity and you While the direction of travel like artificial intelligence, cloud and executive of London-headquartered EP becomes increasingly capital and liquidity harder to come by for between fintech and financial services, have the same risk, you should follow the same was established five years ago, the software as a service, even greater.” challenger bank Finndon. “Digital certain businesses. we often defer to the consumer angle, but regulation. If everyone had the same regula- industry bodies to develop standards in those have to make sure we hold on to it and foster combination of Brexit and now He points to his organisation’s banks will see a major increase in COVID-19 has definitely shown how there is also a huge infrastructure and effi- tion proportionately, it would help the eco- scenarios. We're getting to a point now where it, and that our market can work with other coronavirus has quickened the global survey in which almost half their market share compared to collaborative, four NS important digital is, but it is really impor- ciency play. I think sometimes we underesti- system, financial stability, competition and, we’re beginning to see better support by more markets. We don’t want the UK to be a great drive for older financial institutions of the respondents (45 per cent) high street banks, due to the latters’ raconteur.net/lead-generation experts from the financial tant not to have a knee-jerk reaction. Financial mate the impact fintech can have on infra- ultimately, the consumers and investors. centralised regulation, which should move the place to do business, but solely in the UK and to transform their business and said their strategic response to the lack of flexibility to adapt to market uncertainty has the potential to change habits structure transformation for large One of the big drivers of fintech in the industry forward. not other jurisdictions. If we want to grow operating models, because it’s clear rapidly changing banking landscape conditions, and customers will be EP services industry across all society in looking for technological institutions, keeping them compliant and UK has been the regulatory sandbox. talent within the UK, we have to start at the the future is digital. is to build a “true digital ecosystem”. seeking greater opportunities to “safe havens”. While this may hasten some of reducing costs. Now other jurisdictions are increasingly inno- As we look to a post-COVID world grassroots level. Technology is enabling fintechs to He adds: “It’s a defining moment for save,” says Archer. meet around a virtual Q the debate and support for certain technolog- It's really important for value creation, vative, how can we ensure we stay at the lead- and a Brexit Britain, what is the There are a number of initiatives now enter the banking market and thrive. the banking industry and those who He wouldn’t be surprised if Big BW BW roundtable to discuss the ical use-cases, there still needs to be a meas- throughout the whole of the financial ing-edge so we're not just attractive locally, future of fintech? around STEM [science, technology, Experts predict traditional banks will can harness the potential of digital Tech firms, including Apple and ured and strategic response. services sector, that the architecture and but also supporting companies that start here We have all the ingredients in the UK engineering and maths] and pushing people have to partner with tech firms to technology will shape the future.” Google, begin to “offer banking EP evolution of the sector Customer centricity is really important. structural piece can be improved, replaced to compete globally? I do buy into this concept around access to talent and we need to towards more employment in technology, keep pace with developments. Lee Edwards, vice-president in products to their customer base to BR More broadly, there's a generational in parts and brought forward, both for cost of proportionality. If we can get it right, we will make sure that’s front of mind with respect but there is a lot of catch-up work to do. I'd A study of 200 UK and European Northern Europe, the Middle East create a robust ecosystem”. Archer change. Big banks were viewed as incredibly and time efficiencies, but also in terms of the create better consumer outcomes and more to Brexit. We have increasing levels of domes- also like to see much more done around banking executives by Marqeta, and Africa for Adobe, says: “Banks adds: “You will see an increase in trusted going back 30 years, but the global risk angle. There can be real improvements of a level playing field. tic capital and huge amounts of interest ensuring that home-grown pool of talent at an open application programming have to ensure they keep pace with mergers and acquisitions between financial crisis opened the door to new made through collaboration. There is great value in a balanced internationally in terms of scale. Success the very early stages is truly diverse. Then, interface card-issuing and digital-first challenger banks, such tech firms and traditional banks BR What trajectory have fintechs been on entrants into what were traditionally very People often ask, why is it so difficult approach. The Monetary Authority of between fintechs and the larger established when they come through the education processing platform which as Monzo and Starling, to deliver looking to stay relevant.” Q NS and what impact has the coronavirus protected spaces based on the perception of for some firms, including incumbents, Singapore and the UK’s Financial Conduct financial institutions is about creating the system in the next five to ten years, we have Mastercard has recently invested new experiences that both enhance Sophia Le Vesconte, fintech pandemic had on them? consumer trust. There's also been a conver- to collaborate? Legacy systems would have Authority alike have been very encouraging to bridge of talent both ways and removing fric- ever-increasing diversity in the financial ser- in, found that in the wake of the and complement their bricks-and- lawyer at Linklaters, agrees: “With Fintechs have evolved over a long gence with technology enabling these new been a key reason in the past, but often, fintechs and they're being rewarded by tion from the process of partnering. vices sector. pandemic, more than three quarters mortar branches. This has included increasing digitalisation, we are BW period, but the global 2008 financial business models to flourish. nowadays, startups will find solutions for attracting some of the best companies in the COVID is a stress test and markets are (78 per cent) of banks had been implementing new technologies likely to see a growth in outsourcing BR crisis really kicked off the transformation of that. For me, it's been more about legacy world. But equally there are some jurisdic- cyclical. The UK is very well positioned. I forced to change their future within apps and websites that arrangements between the financial the financial services sector by allowing out- How has the relationship between fin- thinking, though that is changing too. People tions where the standards are too low. This don't think Brexit necessarily is going to For more information please visit banking strategy. enable customers to perform tasks sector and technology service Q siders in. More recently we have seen fin- techs and more traditional players in have, in their mind, ways they should do creates distrust and a lack of willingness from impact that at all. From a cultural perspective, www.dlapiper.com/sectors/financial-services Some 72 per cent of those previously exclusive to the branch, providers.” However, she warns: techs shift from being outsiders to more the financial services ecosystem evolved? things and who they should partner with. We other actors in the ecosystem to work with people like the UK. It has that existing talent surveyed are planning to grow the like cashing cheques or remote “Regulators across the globe are mature companies engaged with all aspects In payments, companies like Visa and have to collaborate because many of our organisations that don’t have a hygiene factor. base and it now has an existing hub of fintechs. number of in-branch digital services meetings with advisers.” quite concerned about the sector BR of financial services. There's been huge Mastercard have approached innova- challenges impact the industry as a whole. The fintech industry has generally There's so much innovation already in place. and two-thirds will invest more in This need to evolve banking becoming overly dependent on BW growth and a lot of learning along the way. tion as an ecosystem. They don't necessarily sought standards, including in a There's a reason why we chose the UK and why digital banking and services. Further, operations provides an opportunity a small number of unregulated The diversity of fintech companies have to own innovation themselves, so long as The regulatory landscape in many ways self-certified manner when external stand- a lot of other leading fintechs do too. one in nine respondents said to streamline typically time- technology companies.” EP Q being produced and scaled in the UK they can help foster it, and some banks are has helped fuel the rise of fintechs, but ards are not available or regulation has not Access to talent is super important. We NS has evolved substantially. The support in starting to emulate that approach. It’s best to how are we now seeing this change? adapted sufficiently. There is a need for may have a lot of talent now, but we 12 FUTURE OF BANKING & CAPITAL INVESTMENT

Samir Pandiri, president of Broadridge International, which has been operating in FINTECH London for more than 20 years, says: “What’s vital is that the crucial response to COVID doesn’t crowd out longer-term policy-mak-

Abel Perez on Unsplash ing for economic competitiveness, and we are confident that the chancellor and the City minister understand that well. What’s Fintech still critical is that clients of fintechs, large and small, make their voices heard, so it’s not just fintech firms making their own case.” The importance of talent and growth out- side of the capital features prominently has room among leading players in the fintech sector. Jeppe Rindom, chief executive of fintech Pleo, a Danish provider of company cards to automate expense reports, with offices in London, says: “The most valuable thing this to grow review should offer is a strategy for national connectivity to help our approach spread out of its organic hubs, which tend to be focused Nimble and innovative, its importance around existing tech hotspots in capital cities. has been recognised by public and “There’s no point in a product that works in Shoreditch, but not in Sheffield or Man- government alike, but fintech has some chester. If we can truly engage with audi- ences outside London, then I expect to see hurdles to overcome yet even more talent emerge, which will drive more innovation and in turn more funding and investment.” Rosie Turner, co-founder and co-chief Liz Lumley executive of InChorus, which provides tools for human resources and employees to hen he was chancellor of the former chief executive of international pay- ensure inclusive work environments, adds: W exchequer in 2014, George ment processing company Worldpay. It aims “Recent stats from Sifted show that only Osborne pronounced that the UK to identify priorities for regulators and poli- 17 per cent of fintech execs in the UK are would become the global capital of fintech. cymakers, as well as for the industry itself. women and there is a significant lack of eth- The industry concerned – the digital-first, The review has five workstreams: skills nic diversity too. We consequently believe innovative technology companies serving and talent; capital funding and investment; there is a firm need for the review to focus the financial services industry – thereby national connectivity; policy and regula- heavily on skills and talent, and to ensure secured a place on the Conservative party’s tion; and international attractiveness and greater diversity within the sector.” policy agenda. competitiveness. Osborne then launched independ- Its report will provide recommendations ent membership organisation Innovate on each workstream and address three successful over the last five years, but it is Finance to represent the UK fintech com- objectives of ensuring UK fintech has “the FINTECH STILL HAS A GENDER IMBALANCE TO ADDRESS imperative that we don’t rest on our laurels munity at Canary Wharf’s Level 39 co-work- resources to grow and succeed”, encourag- Examining the number of female executives at Europe’s fintech unicorns and instead work to ensure we can remain a ing space in London’s Docklands. ing “widespread adoption of fintech solu- world leader for the next decade and beyond. The Treasury began to host leading regu- tions” and “maintaining and advancing the Men Women “COVID-19 has highlighted the strength of the lators from the Financial Conduct Authority UK’s international reputation”. fintech sector as the world economy increas- COVID-19 has highlighted and chief innovation officers from Britain’s Anne Boden, founder and chief executive 71% 73% 78% 80% 80% 89% ingly makes a structural shift to become more the strength of the fintech largest banks to mingle at 11 Downing Street of UK challenger bank Starling, is partici- digitalised. There have been countless exam- with the founders and chief executives of pating in the review’s national connectivity ples over the last several months of fintechs pro- sector as the world what are now well-known UK fintech brands, workstream, which will make recommenda- viding the solutions to many of the challenges such as Starling Bank and Monzo. tions for supporting the growth of regional arising from the pandemic.” economy increasingly However, this was a world before Brexit fintech initiatives through improvement of Jamie Campbell, co-founder of Fronted, becomes more digitalised directed the UK government’s attention else- regional connectivity and leveraging the a recently founded UK fintech aimed at the where and coronavirus became a pandemic strengths of other fintech hubs. UK rental market, is equally bullish on the to throw personal lives and the viability of “The review provides the sector with a cru- industry’s role in financial services and the businesses all around the world into turmoil. cial opportunity to be heard at the highest wider UK economy. Fintech as a concept is about using inno- levels. I really hope the government is lis- “The fintech industry is solely responsi- OakNorth’s Lee concludes: “We must vative business models and emerging tech- tening. At a time of great economic uncer- ble for the improvements in the UK’s banking work together, government, regulators and nology to provide progressive financial tainty, the UK’s thriving fintech sector is and financial services sector since 2008,” says the industry, to ensure we remove barri- products to help support personal lives and driving innovation and economic activ- Campbell. “It is, in a lot of ways, a metaphor for a ers to growth and create the conditions in businesses. In 2020, with COVID-19 sub- ity. My hope is that the review will ensure new generation of finance, without it an already which our fintech sector can continue to jecting most of the country to lockdown, fintech is front and centre of the govern- over-burdened crop of young people would be innovate, bring fresh ideas and compete the UK government launched a six-month ment’s thinking on business and trade poli- far worse off than their parents and excluded effectively. If by the middle of this dec- independent review of the country’s finan- cies,” says Boden. from a finance system not built for them.” ade we have examples of UK fintechs that cial technology sector, citing it as “vital” to UK fintech unicorn OakNorth is a bank for However, more established sector com- have scaled up, demonstrated consistent the UK’s economic recovery. small and medium-sized companies that 29% 27% 22% 20% 20% 11% panies caution the review not to ignore the profitability and competed globally, we Announced in chancellor Rishi Sunak’s provides business and property loans. It is wider fintech ecosystem and ensure voices will know the strategic review has been debut budget in March, but launched in July participating in four of the five pillars of the Monzo Transferwise N26 OakNorth Klarna Revolut are heard beyond the cohort of startups and a success.” due to COVD-related delays, the Fintech review. Head of regulatory affairs Nick Lee entrants that have appeared in the UK over The Fintech Strategic Review is due to Strategic Review is being led by Ron Kalifa, a says: “The UK fintech sector has been very Sifted 2019 the past decade. report to the Treasury at the start of 2021.

Protect your customers from the risk of open banking fraud With Konsentus Verify be confi dent that you are never putting your customers’ data at risk

Innovation and new technology creates challenge and opportunity for fraud. Konsentus stands at the leading edge of open banking identity and regulatory checking. By doing the heavy lifting and removing the complexity, we enable you to provide safe and secure open banking services to your customers.

Why our partners and customers choose us

Trusted Risk Konsentus Verify data mitigation

Fraud Rapid prevention deployment

Single Always integration available

To fi nd out how we can help you mitigate risk, prevent fraud and limit liability, contact [email protected] or visit www.konsentus.com