The future of fintech, from technology to use cases

The future of fintech, from technology to use cases. Main image: Zapp2Photo,
Written by Devie Mohan

Devie Mohan returned to Sibos this year to ask technology and banking leaders what they thought about the progress of fintech since 2015.

Last year, I conducted a series of interviews with banking leaders at Sibos Singapore, to understand what they thought of fintech and the upcoming “competition” from startups. What emerged was, however, very interesting: they were already working with fintechs in multiple ways, and saw the space as an opportunity to innovate faster rather than as something to be worried about.

There was also a lot of conversation around blockchain and its potential. Almost every bank was thinking about how to use customer data better. This year, I went back to Sibos to ask technology and banking leaders what they thought about the changes in fintech after 2015.

“We need use cases, not technology”

In almost every interview I did this time, there was a muted view of fintech investment figures. Banks, financial service providers and product companies explained that they wanted to understand use cases from fintech problems, and focus on driving business problems rather than look at technologies in isolation. With blockchain, machine learning and Internet of Things, it was about understanding the impact it can have for the business based on what we’ve seen in the last three years, rather than something that could potentially have a huge impact 10 years down the line.

Bipin Sahni from Wells FargoBipin Sahni, head of innovation and R&D at Wells Fargo, put it this way: “With any new technology, there’s going to be hype around it. If you look at the hype graph for all the new technologies, sometimes the hype slows down, and that’s what has happened over the last year. Last year, it was like, ‘Oh! I am doing blockchain, I have a new blockchain company, I have this and that’, but now I think it’s getting more concentrated, structured and refined from that perspective, and that’s kind of important for us and the industry.

“Earlier, it was a new technology that was trying to find a business problem, and I think it’s going to be the reverse from now on. There should ideally be a business idea and a business concept, then try to find what technology will solve the problem. I think things are coming together to a point where you are now talking to partners who have the same level of understanding. There is much more effort put in by different companies who are trying to do the right thing for the ecosystem.”

Thomas Zeeb from SixThomas Zeeb, CEO of Six Securities, spoke about the importance of having a business case at length: “I actually welcome the fact that there are a lot of people out there trying to get traction with an idea, but I don’t think it should be solely focused on technology services. The invasion this year is actually driven by business needs and technology opportunities in trying to match those that have come up already. So we’re now bringing together both sides – us as a potential purchaser or developer of these technologies into an application landscape, and the guy who’s actually doing a great idea and maybe finding a new way of solving something.

“The 20th century was all about acceleration, as everything just got faster and faster. We got to see the industrial revolution, and then we went into transistors, semiconductors and computers. But basically it was taking established processes and doing it faster and faster. Now, we’ve got to the point where people have recognised that as the fastest way to work. But at some point you also need to get smarter and smarter. I think that’s the opportunity we’re starting to see, and some of the solutions that are coming out now are useful. So we’re trying to build that bridge between legacy systems and innovative systems to solve that problem.”

APIs are the next big customer channel

Another important topic of discussion (which was already beginning to be talked about at Sibos 2015, and a need for accelerated PSD2 implementation) was the emergence of APIs as an important channel to invest in, and something that can create substantial improvement in customer experience.

Jelmer de Jong from BackbaseJelmer de Jong, VP product management at Backbase, spoke about his company’s omni-channel strategy in which APIs have an important part to play. “APIs are part of omni-channel,” he said. “They have the same place as mobile banking or internet banking in banks’ digital strategies. However, the challenge is how to build business cases rather than technology cases around open APIs and then monetise them. We help them package and ‘productise’ these, and we support banks in becoming PSD2-ready, helping them find ways to monetise them. APIs is another channel by which you consume financial services.”

Lu Zurawski from ACI WorldwideLu Zurawski, consumer payments practice lead at ACI Worldwide, talked about some of the challenges of being ready for open APIs: “Banks today have got the principle of open APIs, and are not encumbered by specific standards such as ISO 20022. But the question is how can we make open APIs work in a way that makes sense to the regulator and the government who is defining this public policy? And this is very different from the old way of saying we will have the policy first, and then a strong governing body, and then we create a standard that could take two years to be validated and agreed upon, and then we can start to build something.

“The UK government is really driving the pace with these regulations. From the perspective of ACI, we try to ensure the components behind API initiation – payment initiation, identity check, risk management and so on – can be easily accessible and consumed by the different standards. We are supplying tools, and not solutions anymore.”

Bank-fintech collaboration is working out well

Tim Bosco from Brown Brothers HarrimanI spoke to Tim Bosco from Brown Brothers Harriman on how its innovation team works with startups: “One of the interesting things we often talk about is the new technology, but I think it’s the application of technology that’s new. We like to think beyond fintech disrupting or disintermediating the banking world, and most of the fintechs we work with don’t think that way. In some cases, they’re taking existing technology and converting them to something efficient; something that provides a customer experience we didn’t have, and that’s what’s valuable to the industry.

“The reason this happens is because there are usually hundreds of projects being run in a bank simultaneously, and these tend to get stacked in order of priority. What’s left at the bottom doesn’t mean it’s not important or exciting, but sometimes you just run out of bandwidth or resources. Yet, for fintechs, these could be big needle movers, and they spend time investigating these. The truly innovative ones aren’t keen to adapt their technology to what the banks want, but banks can learn quite a lot from these startups on how to create use cases that work in the domain.”

Authentication remains a key priority for banks

I asked Wells Fargo about its work on voice-based authentication, which was in the works when I spoke to them last year: “We moved our focus on authentication to biometric authentication with the veins of your eyes. EyeVerify is one of the companies in our accelerator programme, and we’ve already deployed the pilot. They just got acquired by Alibaba two weeks ago, so that’s our first success story!

“We didn’t start the accelerator programme to acquire companies – we’re interested in access to solutions. We’re also looking at other forms of authentication, such as palm, voice and face, and of all the factors, what’s emerging as most important is location. We are understanding how corporate customers work and creating a geofence for their employees. If you step out of that fence, the notification and all related factors change.

“It’s important that you think about yourself as a framework going forward, not just one of the things, because it’s a framework that can bring in more capabilities in order to become a platform. So authentication services become the important things to focus on.”

The digital engagement layer is very important

Sanjeet Rao from OracleSanjeet Rao, VP of software development at Oracle, explained how the product is evolving to meet the new digital engagement models of banks: “I think the new core of these digital engagement services is what’s exciting – that’s why we’ve hollowed out our old core and built a new core. I think our digital engagement layer, having a lot of customer updates, is what people see and need. We’ve got something called the product manufacturing capability that can help you build the product catalogue as well as price it from an enterprise pricing perspective, and it’s really the customary approach that’s been picked.

“As we make our investments, we’re also ‘componentising’ some of the core capabilities. For example, in the corporate space, we launched a corporate lending platform that just does syndicated bilateral lending – a very high-end, specialised product. We believe that what was in the traditional core will also get ‘componentised’, and that’s the approach we’ve started with on the digital engagement layer before we move to componentising of the core.

“There’s still some time for the market to take up componentised cores, but it’s going to happen over a period of time. It’s the digital experience and engagement that will be the first thing.”

Understanding the local market is key

clayton-mcdonaldRegardless of the global nature of your business, an ability to understand local banking needs and having local partners was stressed upon in most of my interviews. In fact, for INTL FCStone’s Global Payments Division, this was a core part of its business.

“What we would do is take spot foreign exchange pricing from the banks and put that price out to those organisations so they have transparency in the process on a real-time basis,” said global head of sales – APAC, Global Payments Directive, Clayton McDonald. “So, out of New York, London and Singapore, these organisations could exchange their products. They would know before sending any funds out what exactly the process is going to be about the transactions and the transparency around them, and they would also know the exact exchange rate; they would know when the funds would be delivered on a local level and then to business days, and they had somebody to chase, more importantly, if the funds didn’t turn out to be right. That’s how we built our network that we have now.”

Almost all the interviewees thought that the fintech developments in the past few years have tremendously helped and influenced them, with a clear need now to focus on tangible improvements and a focus on niche areas and specific challenges. As Bipin Sahni from Wells Fargo put it, some of the key issues that still to be addressed are scalability, security, performance and governance. If we can solve these four things, fintech will have done a great job for the future.

READ NEXT: Transforming the landscape – my learnings from Sibos 2016

Main image: Zapp2Photo,

About the author

Devie Mohan

Devie Mohan is a fintech industry adviser and analyst based in London. She is the co-founder and CEO of Burnmark, a fintech research company, and is a panel member on the ING group Think Forward initiative on better financial decision making. Devie is actively involved in the fintech community and has been listed in CityAM's Top 10 Fintech Powerlist, and in Innotribe's Fintech Power Women list.

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