Banking as a Service (BaaS) and Banking as a Platform (BaaP)
were key themes throughout both days of the Temenos Community Forum (TCF).
These topics were also hit on during a session about how to scale your
business, led by Ross Mallace – speakers executive vice president, global head
of SaaS and partner ecosystem at Temenos.
Speaking about the customer of today, Mallace highlighted
that "things are changing and changing really fast. Changing customer
demand is happening rapidly. The demand for hyper personalisation is here more
than ever before. The need for instant gratification, with the short attention
spans of our users, it's staggering. And we all here are trying to figure out
how best to keep up with this demand.”
Ermes Dajko, senior cloud solutions architect at Temenos,
gave a demo of the scalability of their platforms and said “everything you have
seen throughout the day, composability, high water benchmark, composable
infrastructure, all of this comes together with the ecosystem capabilities and
allows us to bring those new components and extend the services very rapidly.”
Andrew Reeves, managing director, SaaS business office, at
Temenos also spoke about scalability and explored how it is “more about right
sizing your technology for your particular needs at a particular moment in
time. And then being able to seamlessly scale that technology up and down,
either to cope with fluctuations in demand from your users, or to grow that
technology. as your business grows. But size isn’t everything. It’s also about
regional scalability.
“Cloud and SaaS provide the capability to take services on
demand as you enter new markets,” Reeves argued. “When we think about BaaP,
it’s about opening up your platform, allowing the services that you've
manufactured to be distributed to the customers you own, through new channels,
to fintechs, to the use of other brands, through the use of potentially other
banks, as part of an open banking ecosystem.”
Mallace pointed out that the same was true of BaaS: “it is
all about being able to offer banking services to the non banking sector. The
customers want choice, they want everything hyper personalised, available in
that one spot. Let's say, they go and buy something on Amazon, they want to be
able to choose from the financial products that will help with that
transaction, like being able to pay for it over time.”
Vlad Lounegov, CEO of Mbanq, also took to the stage to give
an American banking perspective on this issue: “The banking as a service value
chain of the United States is much broader. It starts with the regulator, or
multiple regulators on the one side, followed by bank licenced institution, and
then followed by technology provider technology partner who works very closely
with the service provider and delivering this value proposition to the
fintech.” A lot is to be expected from BaaS and BaaP in the coming years.
Engaging customers
Opening another session on day two of TCF, Elias Ghanem,
vice president and global head of Capgemini Research Institute for financial
services stated that “clearly we are not in good shape, banking is in a state
of flux." He went on to report that they found that 82% of bankers are
struggling to identify new customer segments, and 49% claimed they are
struggling to deliver personalised content through the right channels.
“Consumers today, when they look at banks they see three
levels: service, value, emotion. Yet when they go to the bank, 29% report they are not getting service
banking, they are not seeming to get getting this basic thing they want.”
Ghanem argued that what banks need to create is more of an experience for their
customers, and that is something that is “fun, it's gamification, it's
perceived that I [the customer] am known for something more than just a
number.”
He further mentioned that this is something that many
fintech firms and neobanks have been able to do, and that over the last two years
they have “leveraged technology to really become actors in the game, the New
Age players are completely filling the void. Slowly but surely they are
capturing our minds and our wallets, because they are servicing us, they are
giving a value experience.”
In advising banks on how to close this void between banks
and fintechs, Ghanem stated, “it’s essential for the banks to have a big shift
in their mindset from running after the bank into orchestrating customer
experiences, orchestrating customer experiences.”
Additionally he suggested that banks “decode how the others
are doing it. Decode how the New Age players are capturing value, creating
value and gaining customers.”
An update on regulation
Lisa Hall, product director – regulation and compliance at
Temenos, led a session updating on Temenos’s regulation technology. Hall
highlighted some of the challenges compliance officers are facing, and the cost
of non-compliance. She noted that “in 2020, the FCA published £192 million
worth of fines, and we saw that increase massively in 2021 to up to £567
million. Of that £567 million, one of the banks was fined a total of £264
million in 2021 in offenses related money laundering in 2007.”
She also cited the rise in GDPR fines from £179 million in
2020, to £1.2 billion in 2021. Although much of these are due to social media
firms, banks are also reflected.
Hall further added that at Temenos, they have seen an
increase in the number of regulatory changes, stating that, “in 2020, the
average day alerts went up to 257 a day, which amounted to 67,000 over the
course of the year.
“Increasing alerts reflects a significant social, political
and economic development. The new political administration in the United States
and Brexit would have also contributed to these and the social economic
landscapes that have been redrawn because of Covid-19 pandemic.”
Hall provided a description of how Temenos uses their
technology to meet regulatory challenges. One example given was of their module
used for qualified intermediaries (QIs). Hall reported that “our new QI module
is something we've been asked to do on a number of occasions over the years and
we managed to add that in over the last year. It is designed to support banks
that act as QIs under Chapter 3, enabling banks to comply with the
documentation and withholding requirements related to the income received by
their customers from investing in US securities. We provide support for the
client identification and due diligence procedures We also have user defines
rules that you can set up yourself making it very flexible system to identify
QI status.”
The power of good
working relationships between banks and fintechs
“You often hear that banks and fintechs working together can
be a bit like a boxing match,” said Abid Mumtaz, global lead at Wise, who
presented the success that Wise has had as a fintech working with banks, and
what can be learnt from their journey.
Mumtaz posed three main questions that need to be asked in
order to form a good working relationship between a bank and a fintech.
The first is to ask if you are solving a real problem. “Too
often, this question doesn't get asked and often leads to confusion, lack of
alignment, and ultimately, no direction to what the end goal should be.”
The second is to ask if the bank and fintech understand each
other. “Banks are highly regulated, very complex organisations. On the flip
side, fintechs seem to be very agile, and lean organisations. And that comes
with obvious differences in the way they approach businesses.”
The third question to ask is whether the relationship is
leveraging each other’s strengths. “There's a strength to play off. It's not
all one sided benefit, there should be a mutual benefit.”
Mumtaz expanded on this guidance with experience from Wise.
The first question was answered quickly as Mumtaz drew upon the fact that Wise
moves money across borders and traditional methods of doing this are “broken”,
expensive, slow, inconvenient and the process is too opaque.
When looking at the second question, Mumtaz argued that an
initial barrier is often that banks assume a fintech’s infrastructure is “built
the same way as theirs. Whereas fintechs have the benefit of not having 20
years of legacy technology.” However, he pointed out that despite being lean,
fintech technology is only designed to solve for very few problems. In Wise’s
case that is cross border payments. So this is an area where both banks and
fintechs need to be understanding of each other.
“Fintechs should spend the time to invest in making it
easier for their banking partners to work with them.”
Meeting the challenge of green regulation
One of the final sessions of the day was taken by Greenomy’s
head of product, Henri Vanhomwegen. Greenomy is a Belgian regtech focused on
helping EU corporates deal with sustainability reporting legislation.
Vanhomwegen opened by discussing what the green taxonomies
are. “A legally binding screening standard. That means that any voluntary
corporate in Europe and any financial institution will need to use the taxonomy
to disclose their sustainability levels.”
The taxonomy has already been applied to 11,000 corporates,
reported Vanhomwegen, but by January 2023 ,non-financial corporates will be
mandated to provide their full taxonomy exercise. Financial institutions will
also have to meet these standards by January 2024. By 2024, the taxonomy will
apply to more than 50,000 corporates.
“The Greenomy has created an ecosystem that aims to be a
facilitator for the taxonomy for each impacted stakeholder. The way we've set
up the platform is that we have digitised the integrity of those legislation
within the ecosystem.”
Users will be shown what specific criteria they need to
assess to prove their sustainability. Once the company in question proves their
sustainability, the platform “can help them collect and generate the data
needed for the screening, compute their KPI automatically and generate their
taxonomy complaint report with all of its underlying raw ESG data that can then
be sent to the auditor portal, where we will secure the timely providing of
validated EU taxonomy report to the ecosystem.
“That means that asset manager can now plug into the
ecosystem, retrieve the ESG data of the counterparty and the platform will
automatically compute their green investment ratio and produce their necessary
report.”
Greenomy was created based on a report by the EFB and UNEP
FI, which recommended such a tools creation. They work within the Temenos
platform.
Click here for the
original article.