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The second of two episodes recorded in partnership with Banking Circle Group at Money20/20 Europe, that took place in Amsterdam on 7-9th June 2022. We recorded a series of interviews on the Banking Circle booth with a number of the speakers from the conference.
First to join us was Kahina Van Dyke, Global Head, Digital Channels and Data Analytics at Standard Chartered, who had just spoken in a session on the rise of fintech transforming the next generation of banking.
Kahina said that we are in a constant state of change. But right now, it feels like there’s a collection of forces that are really accelerating transformation, and it’s coming from the fintechs, from the banks, and from data science, analytics and blockchain and all of these convergences.
Kahina said that every single bank in the world is a fintech company, and if they don’t realize they’re a fintech company, they probably won’t be a bank in ten years. Technology is driving what we’re delivering in financial services. Technology is digital, data and user experience. She added that everything on the banking side is changing in terms of the real time nature of how we make decisions, onboard customers and serve customers. Every bank is a fintech. On the fintech side, ten years ago, people thought these were really cute experiments, and now those cute experiments are literally market movers now, worth $10 billion or $20 billion that have a responsibility in a new ways that they really didn’t prepare for. She said that regulators are now looking at them and saying, ‘wait, do you have compliance? Do you have KYC? Do you have AML? What are your algorithms? How do you identify risk and make sure that you have liquidity?’
Kahina said that technology is going to lead financial services – artificial intelligence, blockchain, big data, cloud. All of these areas that traditionally have not been part of banking are now going to be required to compete and be successful and deliver clients’ real time solutions. However, she added that technology needs operators. It needs people who understand the tools. As the machines get better, human beings can be smarter. But we have to not believe that this is about technology. Technology is a tool for human beings who are creative, who are in environments where they’re allowed to innovate and fail. You cannot be creative without failure. It’s trial and error. It goes against the traditional certainty of banking. Banks like certainty. They want predictability. And all of a sudden, we’re moving into this world where predictability is not promised, where people can have an artificial sense of precision about what’s going to happen in two or three years. But the reality is a bunch of smart people leading in, in safe ways and adapting as new information comes. That is the cultural shift and the mind shift that has to happen to really embrace the future and what the future is going to bring? It depends on how many smart people are going to be in that room.
Next to join us was Jakob Pethick, Chief Commercial Officer of the embedded finance provider, YouLend.
Jakob said that embedded finance is a buzz word you will hear a lot. To him though, embedded finance is a trend that we’re seeing where software providers are embedding financial services and finance in particular into applications. For example, in the ecommerce space, you see companies like Amazon, Shopify, and eBay offering financing at the point where buyers and sellers need it. You also see it in the Epos space where companies such as Toast will be providing financing.
Jakob thinks that whilst it’s a tough environment at the moment, with rising inflation, supply chain disruption, and rising rates, embedded finance can be a real driver for good in that case. He said that you typically see small businesses struggle with working capital and traditional providers pulling away from providing that capital. Embedded finance providers, however, often take a broader view of the customer – they don’t just care about making money on the loans they’re issuing. They care about keeping their customers alive, thriving, and so he thinks a lot of the embedded finance providers we see today will help small businesses access finance in a time of need. It therefore reflects this trend that a lot of the companies that are offering financing today care just about more than the financing and so he believes that in the long run, that’ll be good for the small businesses. The enterprises that offer embedded finance tend to want to keep their customers on their platforms, so Jakob said that we see churn – half roughly. We tend to see the underlying businesses grow a lot as well – 20-30% faster in the six months after they obtain financing. The small businesses that access finance are often excluded by traditional institutions and being able to access some form of growth capital can really help them take off.
Jakob added that historically, embedded finance has been provided by payment companies and e-commerce platforms in particular. However, YouLend are shortly to announce a partnership with a food delivery company who help takeaway companies deliver food and so he thinks you are going to see a lot more of these vertical specific applications of embedded finance where a company who understands the end customer is seeking to also offer financial services.
Our third guest was Iana Dimitrova, CEO of OpenPayd, a banking as a service provider, that Iana said provides infrastructure for anyone that wants to build embedded finance to grow their business.
Iana had spoken at the event on API quality in open finance and banking, which she said was very important for the development of the industry, because if you think about it, ultimately businesses are not interested in the infrastructure, businesses are not interested in the pipes that power whatever financial solutions they’re using. They’re ultimately interested in growing their customer base and delivering better customer experience. But in reality, the only way to do that is by ensuring that there is a level playing field and that there is interoperability amongst the different systems that are connected to one another to complete a full transactional cycle. She said that in her session, there was a very healthy debate about the benefits of standardization and whether standardizing APIs is killing innovation, whether it’s killing that last mile that is really making the difference. She thinks in the end, they all agreed to disagree on the topic, and agree that a healthy level of regulatory standards are required so that we can achieve a minimum level of system interoperability, ideally to have that on a global scale, not just in regions, whether it’s in Europe or the MENA region. She added that the last mile of innovation, the proprietary development, the proprietary APIs are what really makes a difference for the user experience and ultimately for generating value for the end customer.
Iana thinks we’re moving more and more into an interconnected ecosystem and as the economy is demanding more and more fully integrated solutions to be able to grow faster, the industry is really forced to work even more closely together. She added that there are few overarching themes. Open banking is still very topical and the applications of open banking and how to actually generate value out of the standard set by the open banking legislation, embedded finance and whether we are going to see embedded finance really take off is another big topic that people think about. And of course, crypto and the current market conditions. But I’d say a very, very healthy mix of innovation and partnership as well.
Iana is very proud to be selected by Yapily as their exclusive provider of embedded financial solutions. OpenPayd will provide Yapily the payments account infrastructure as well as the fully automated FX infrastructure. They are integrating the two platforms to their systems into their product and platform capabilities and therefore enabling them to go to their own customers with a wholesale holistic payment solution that allows their customers not just to initiate payments but also to store value to do FX to really manage the end-to-end payment flows better. She said it’s moving payments and payment accounts and FX from being a commodity or being a cost centre for any business to placing them at the forefront as a driver of revenue and driver of growth for someone like Yapily.
Next up was Andrew Considine, VP, Head of SMB and Clover EMEA at Fiserv, a company that provides technology to the financial services industry.
Andrew said that Fiserv operate heavily in the payments space, everything from merchants that are running cafes and restaurants all the way through to big enterprises. He thinks what they are seeing is there’s been a change in consumer behaviour from a payments’ perspective, obviously driven by the pandemic. That behavioural change is coming through beyond the pandemic as well. Consumer expectation is now being able to pay anywhere through any channel anyhow, any way they like. So, by providing the technology to make that feasible is where Fiserv is playing at the moment, whether it’s online or whether it’s card present. He added that there’s still a big payments presence and card presence, people in shops and physical locations. So, the link between those two and making that a seamless experience, whether you’re a consumer paying for a coffee or somebody buying food from a fast-food restaurant all the way through to making payments for large services and large products as well should be a seamless and simple experience for everybody.
Andrew said that as the industry opens up and we’re talking about ecosystems and interoperability and companies working together and becoming more open, the data challenges just increase with that as well. So, whether you’re a small merchant or whether you’re a large enterprise, some of those data challenges can be common the whole way through. He thinks that’s going to be a challenge. Also as more platforms integrate, it becomes more open, it’s harder to share the data and it’s harder to provide a seamless experience for consumers. And so, consumers are expecting to be able to pay anywhere, any time, but at the same time be treated as an individual. So, companies, whether it’s e-commerce or whether it’s, in a physical location, they’re linking of data and customer experience is going to be one of the key challenges going forward.
Andrew said that we are going to see more and more innovation coming out like the example of paying for petrol using Alexa. As we see the paradigm shifting of people paying for EV cars or services for those cars as well, that could be in the vehicle itself or at a charging point or in a shop or location, and linking the data between all three of those experiences, this is one of the key things that Fiserv are building with that partnership. They also recently announced at the Apple Worldwide Developer Conference that they are partnering with Apple on the tap to pay capability with iOS and so will be launching their SoftPoS capabilities with Clover in the SMB space, which will mean we see more and more connected data and payments capabilities across the industry.
Andrew said that Carat is Fiserv’s enterprise brand and that the thinking behind it is providing an operating system for the enterprise world. This is about providing the ability to be able to hook into a single platform with common interfaces and integrations, a common data stack, and all of the areas like risk, compliance, security and fraud management, all controlled within one environment, allows enterprises to be able to hook into that platform and benefit from a company of the size of Fiserv. Everything from companies in the retail space into the restaurant space and to the franchise space, coming into a single platform means that whether they’re operating in Spain, the US, UK or Australia, it’s a common platform that operates worldwide.
We were then joined by Mariana Gomez de la Villa, Centre Expertise Lead for Distributed Ledger at ING, a bank with headquarters in the Netherlands, but that is across the globe in over 40 countries.
Marianawas really pleased to be invited to speak on a panel on this topic specifically because obviously she is a woman but a woman in technology and a Mexican, which means that it’s like a double minority sometimes, although she added that she to work for a Dutch Bank, ING, that has a specific target with regards to diversity and inclusion. She said that ING looks at diversity not only for the point of view from whether you are a female or a male, but also from the point of view that you need to have 70%, for example, of the team from the same gender but also from the same age group or from the same nationality or background. That means that normally, for example, you would need at least three people in a group of ten, so the other 30% that needs to be from a different gender, from a different group of age or from a different background in order to really change the conversation, to really influence a little bit more towards a better target. This has meant these target teams actually improve a lot in the way they make decisions. They are more inventive. And when you actually feel supported and feel empowered, you thrive. And when you are free to be yourself as well, it’s a better way to reach your purpose which is one of the things of ING’s strategy. Mariana also sees this not only at her level of what she does but also on the board, where they have female colleagues and those from different cultural backgrounds. She added that there’s a lot to happen still in the financial industry as a whole. So not only in tech but as well, in certain institutions in the payments industry, such as, for example, at Money20/20 where there was a huge amount of men there.
Mariana also mentioned a few of the things that she is doing with her team. She said that being technologists, sometimes you want to share the knowledge that you gather throughout experimentation and the learnings that you have achieved, and share them with a wider audience. They publish, for example, white papers, and a lot of the times you also have these biases in academia. So, it’s not only the financial industry or the payments industry, it’s academia as well. So, they have implemented certain types of policies for example, whenever they publish white papers, they make sure that they don’t add a full name, but just add an initial like M in her case. And then the last name, Gomez de la Villa. So, then people wouldn’t know if you’re a female or a male and then they would quote you. She added that they have seen as well from research that when you are a woman, you are less likely to be quoted by ten times. So then in this case, applying those things, whatever is in your power and as little as it might seem, it already starts changing things. And not only things within your team, but you start also permeating those types of ideas to wider colleagues, for example, within your own institution. And then you start growing more in the ecosystem, etc. Another thing that she thinks was quite unique, is the fact that they have the centralized autonomous organizations in the blockchain industry, and these are also a mechanisms where you can actually vote for a proposal of something happening within that ecosystem. Whether that’s a code change, an upgrade, an update, or anything needs to happen, it’s voted upon, but it is voted upon pseudonymity. So, people are pseudonymous in these organizations. And it doesn’t matter which age you are, where you’re coming from, where you are located, which gender you have, because you are pseudonymous. So, then they don’t know these items from you and then you can just propose a change and then they might vote only on your contribution.
This was the second session that Mariana spoke in. She said that if you look at customer experience (CX), ING have accommodated and organized themselves around it and so instead of product managers, they have customer journey experts, who map the journey and then see actually where the friction points are – which there are a lot of in the areas of blockchain, cryptocurrencies, the metaverse and all these web3 like type of layers that you may have in this ecosystem. One of those friction points could be, for example, seen as regulation, then you have as well, the other side from DLT, this related technology per se, that is regulated. She said that when you took a real-life asset such as a bond or security, and you put it on the blockchain – that is already regulated. But the question is more the part of the ecosystem which is not 100% regulated yet, but she thinks we are going that way. We have the European Union, the European Central Bank, which are looking into this mechanism, such as creating, for example, MICAR, and that the EU as well, is doing some experimentation by utilizing DLT in a lot of different aspects in the infrastructure, and as well, for example, we see it on the central bank digital currency topic.
Mariana said that there are other risks that need to be overcome too, such as risks on the segments of the market which are not regulated, for example, decentralized finance, for example, cryptocurrencies. There are risks because there is no consumer protection. And obviously, financial institutions need to ensure that whenever you provide services, those services are at par with your regulation. That you have to appeal, whether that’s retail, wholesale, whatever it is. So, the risk is obviously, that your customers might be scammed in one of these markets or that they might have investments, that are not actually properly provided on a later stage, etc. But that consumer protection, that duty of care that financial institutions have is exactly the one that is dictating ING’s compass and is ensuring that whatever they do, whatever experimentation they do, is followed with their ethos and values. In everything they do, they need to follow that regulation. They need to ensure that they are protecting their customers. They have to ensure that they are protecting the financial ecosystem because they are a systemic institution.
Mariana added that we are started seeing other technologies such as machine learning, artificial intelligence or quantum being merged. So, complementing actually the solutions that ING are deploying in production. You are now starting to see people experimenting with making quantum resistant protocols or, for example, having machine learning algorithms that are put to make better decisions. And then those decisions being recorded on the blockchain and then feeding back again, another decision-making protocol and then going back into the blockchain, etc. So, you start seeing how they indeed start complementing each other, how you can plug and play with them, and then see which other parts of your journey towards your customer may be improved by connecting the dots.
Our next guest was Daniel Kjellén, CEO of Tink, a European open banking platform that stitches together some three and a half thousand banks into one platform. Daniel explained that they also build products to help their customers who are always financial institutions, to get the most out of this underlying infrastructure, both to aggregate data and also to make payments.
Daniel spoke at Money20/20 with Charlotte Hogg, CEO of Europe at Visa, the company that acquired Tink.
Daniel said he is super proud to now be part of Visa and that one of the perks or the curse of being an entrepreneur is that you always believe in yourself and think that you’re on the verge of doing something amazing. They have always felt that they deserved to be part of a great organization like Visa or to remain independent. He added that they have been venture backed for the past ten years, which has served them well when you need to do the trial and error. But now they want to be the global open banking platform, to power the pioneers and give everyone access to this amazing infrastructure, which is based on people’s bank account, because they think it’s going to increase competition, innovation and eventually consumer choice. He said he couldn’t really find a better home in order to achieve that vision and dream than Visa being a global company, having seen first-hand the upside of building financial infrastructure and how that can benefit individuals and societies and businesses. If you get it right that it can take time to build it and have the stamina to do it, but also have the brand and the global organization and so he said it’s a perfect place to be.
Daniel said that they have been in and out of fashion for the past ten years. Over the past few years they have been fortunate enough to have some people knock on their doors and they have always looked at this with the same lens of whether it is going to increase the likelihood of them being able to be the global open banking platform? And the answer previously was no, but with Visa, the answer now was yes. He thinks they met a team at Visa that both culturally had a match with them, which was important in both sides that had set high bar for themselves, big ambitions. But he thinks that they’ve also seen first-hand the enormous potential, if you have the stamina to build out a global payment network or in this case, an open banking network, and the upsides that comes both from a business perspective, but also then also from a consumer and societies. Daniel said that this now means they can have a slightly more long-term horizon. They can probably go global faster than they could have done otherwise and leverage their organization – knowing about cybersecurity and how to build trust.
We then spoke with Joanne Dewar, CEO of Global Processing Services, an issuer processor, which, as Joanne explained, means they are the technology behind the card payments processing for many of the world’s leading fintechs, challenger banks and digital banks such as Revolut, Starling, Curve and many others around the world right now.
Joanne explained that an orchestration layer is really a technology layer that sits in an organization to help manage the many dependencies and many integrations that an organization needs to have in order to be able to manage a program. The fintech ecosystem is extraordinarily complex. Even when you’re working in one market, you need maybe eight or more different partners in order to be able to bring a program to life. When you are then building out a capability across multiple markets, in multiple geographies, very often those partners cannot provide the support across all the geographies. So, you need a more variety of partners. So, you can either be in a position of having lots and lots of point-to-point integrations, which creates like a spaghetti matrix of integrations. Or you can put an orchestration layer in the middle which enables you to have point to point integrations that are more simple to manage, support, bring other players in or ultimately to upgrade over time.
In her session at Money20/20, they talked about both the merchant acquiring side and the issuing side, and they concluded that thematically the issues are the challenges, and the opportunities are exactly the same. Joanne said that the benefits from the issuing side are easiest to describe by giving a real example. She said that in their relationship with Revolut, they have been able to support them to gain scale at speed and efficiently from a cost perspective. They have supported them in going live in 42 different countries with ten different card manufacturers, with four different issuing banks, with two schemes in three continents, all running on a single API integration, a single interface into them. So that enables them to provide a single user experience, a single mobile app-based experience consistently globally, without having had to develop lots and lots of different integrations. She said that it’s pretty unique and has enabled Revolut to scale geographically very quickly without having huge cost. They are able to leverage the advantages of having multiple partners and multiple suppliers, whether it’s from a resiliency perspective or also a cost management perspective as well.
Joanne said that there has been transformation in the payments ecosystem over recent years ultimately due to customer demand, whether it’s customers – the consumers or businesses. There is a clear drive to move away from cash. There’s a generation that is expecting everything can be done in an instant. Everyone’s got a mobile phone. They’re expecting that their relationship with their bank can be instant and available at the touch of a button. And one of the things that’s been really apparent through the pandemic is it’s the same experience in every geography across the world – if anything, there’s been an acceleration.
Joanne said that the challenges are really that when you’re working with a regulated entity, there is jurisdiction boundaries and most of the fintechs in the world, they’re thinking big. They’re thinking beyond national boundaries. They’ve got all got ambitions for global domination. And in order to be able to provide an offering across multiple markets, you need to find multiple service providers, whether it’s the issuing bank, whether it’s a KYC provider or whether it’s card manufacturer. And so, you need to pull together that collaboration of an ecosystem for each market that you’re going into. She added that we’ve been really fortunate in Europe to date in that we’ve had the CEPA agreement, which means that you can access all the markets across the single European payments area whilst being registered in one market and then passporting that license across. And that’s really why originally so many of fintechs started in the UK where there is a very supportive regulator, and they were able to passport that out. When you start to look outside Europe into Asia-Pac or MENA or other geographies, actually you need to grow, well you need to build out your capabilities and your licensing on a market by market basis, which means that for each country you’re needing to find the partners to be able to support. What an organization like GPS does is help navigate that complexity because as in the case of Revolut single integration with them, that’s technical taken care of. And then you can just find the issuing relationships, the contractual relationships that you need to be able to service that market.
Next up was Teo Blidarus, CEO and Co-Founder of FintechOS.
Teo explained that his company started four and a half years ago with this idea that every company is becoming a fintech company. Their job is to help any company launch better, faster, cheaper financial services and products into the market. They are working with banks, insurers, retailers, e-commerce, telcos, and infrastructure players.
Teo said the trend of the show was anything linked with embedded finance from embedded payments to BNPL even embedded insurance.
Teo thinks that open source has become a source of innovation for the banking sector. At FintechOS, they also contribute to open source, but also embed and work with open source technologies.
Teo said that banking and financial service companies need to be mindful when they’re embarking on their journey of digital transformation and that the most important thing is that nobody wants to buy a mortgage. Everybody wants to buy a house, and this is where the focus collectively as an ecosystem of financial services infrastructure should be. The house brings together a mortgage, probably a term life, insurance, and refurbishment loan, household protection and even a pet insurance if you’re a pet lover. But he thinks the main idea here is that customers are looking for ambient financial services, personalized, differentiated. There’s a huge opportunity for the whole ecosystem, the traditional incumbents, but also the newer players to participate in that. Customers are also looking for end to end customer digital journeys rather than not only, the tip of the iceberg. And he thinks looking at the digital customer experience, but coupling it with, better personalized products and lean core operations, it’s a win win win. Because at the end of the day, customers are happier. But also, the financial institutions are being able to drive more efficiency, which is very, very important today.
Teo said this is a fantastic achievement for a company that is 4 years old in quite a mature market being effectively backed up by two of the largest, if not the largest institutions who are playing here, a tier one consulting company like PWC and arguably the most important technology provider. He thinks everybody understands that at this point when we’re talking about digital banking services, just having an off the shelf solution may be cloud based off the shelf solution is not good enough. So, what PWC has been looking after has been a fintech infrastructure as a service. So, an infrastructure that is very flexible, can be operated through no code, low code to be able to empower people to do more, to innovate faster. Technology that is composable so they can effectively tailor the infrastructure to suit the reality of the customers. And some customers might have a gap in their innovation in core processes. Some of them would have gaps of innovation in customer journeys. And FintechOS is that glue in the middle that helps PWC, and Microsoft orchestrate best of breed fintechs partnerships.
He thinks that it’s a tremendous endorsement for the company. They have been selected and are working with other tier one consulting companies. He thinks everybody understands that in the world where every company is a fintech company, there’s a new category of technology that has to dwell on both flexibility and cost efficiency, but also starts from the customer perspective when designing financial services. And this is where FintechOS can really play a real great part.
Our final guest was Rogier Schoute, Chief Product Officer of Mollie, an online payments company headquartered in Amsterdam, active in seven European markets and serving over 150,000 retailers and customers.
Rogier said that Mollie is using Plaid’s open banking APIs to further improve the onboarding experience of their customers. As a regulated institution, they need to perform the necessary checks before a customer can go live. He said that Mollie has always been very true at making that process as seamless as possible and using Plaid’s technology, they can now make that process real time instead of having this take a couple of days. It means a better experience for their customers and for Plaid it means partnering with one of the leading European fintechs and proving value with open banking, which is slowly starting to happen in the industry.
Rogier think the precedent this sets for the industry will be that hopefully we’re going to see more partnerships that actually deliver value for customers as opposed to companies trying to build it all themselves and not deliver a compatible solution for their customers. This will be a strategy for Mollie moving forward – they want to give an integrated experience for their customers, so they don’t necessarily have to see those partnerships. For Mollie, it’s delivering the front facing product solution. But at the end, it’s around delivering the best value and best products for your customers and Rogier said that partnerships are absolutely a part of that, especially if you look at the speed of innovation in the fintech industry. You’ll need to partner with the best specialists in order to deliver a complete product to your customers.
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