TCF 2022: Bridging the Fintech and Banking Gap

Across both days of the Temenos Community Forum (TCF), the concepts of Banking as a Service (BaaS) and Banking as a Platform (BaaP) were prominent. These subjects were discussed during a meeting led by Ross Mallace, executive vice president, global head of SaaS and partner ecosystem at Temenos, on how to expand your business.

When it comes to today’s customers, Mallace emphasizes that

“things are changing and changing really fast. Changing customer demand is happening rapidly. The demand for hyper-personalization 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.”

Temenos’s senior cloud solutions architect, Ermes Dajko, demonstrated the versatility of their systems and stated, “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.”

Temenos’ Andrew Reeves, managing director at the SaaS business office, also discussed versatility and 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.”

Andrew Reeves

The same may be said about BaaS, according to Mallace:

“It is all about being able to offer banking services to the non-banking sector. The customers want choice, they want everything hyper personalized, 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.” 

Mbanq’s CEO, Vlad Lounegov, also joined the stage to provide an American banking viewpoint on the matter:

“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 licensed 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.”

Customers’ involvement 

On day two of TCF, Elias Ghanem, vice president and global head of Capgemini Research Institute for financial services said that “clearly we are not in good shape, banking is in a state of flux.” He further said that 82% of bankers are having trouble identifying new consumer categories, and 49% are having trouble delivering personalized material through the appropriate 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. 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.” 

Elias Ghanem

He went on to say that several fintech firms and neobanks have been able to achieve this and that 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 the last two years. 

Ghanem advised banks on how to bridge the gap between banks and fintechs, saying:

“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.” 

He also urged that banks

“Decode how the others are doing it. Decode how the New Age players are capturing value, creating value, and gaining customers.” 

Regulation update 

Lisa Hall, Temenos’ product director for regulation and compliance, conducted a session on the company’s regulation technology. Hall discussed some of the issues that compliance officers face, as well as the cost of non-compliance.

“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 to money laundering in 2007.” 

Lisa Hall

She also mentioned how the GDPR penalty increased from £179 million in 2020 to £1.2 billion in 2021. Although social media companies account for the majority of these, banks are also represented. 

Hall stated that there has been an increase in the amount of regulatory changes at Temenos, adding 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 reflect 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 the Covid-19 pandemic.” 

Lisa Hall

Temenos leverages its technology to address regulatory hurdles, according to Hall. Their module for qualified intermediaries (QIs) was offered as an example.

“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 value of strong collaboration between banks and fintechs 

“You often hear that banks and fintechs working together can be a bit like a boxing match.”

Abid Mumtaz, global head at Wise

Mumtaz spoke about the company’s success as a fintech working with banks and what can be learned from their experience. Mumtaz suggested three primary issues that must be answered in order for a bank and a fintech to develop a strong working relationship. 

The first step is to determine whether you are dealing with a genuine issue.

“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 question is if the bank and fintech are on the same page.

“Banks are highly regulated, very complex organizations. On the flip side, fintechs seem to be very agile, and lean organizations. And that comes with obvious differences in the way they approach businesses.” 

The third point to consider is if they are making use of each other’s strengths.

“There’s a strength to the playoff. It’s not all one-sided benefit, there should be a mutual benefit.” 

Mumtaz added to this advice by drawing on Wise’s expertise. Mumtaz promptly responded to the first questions, stating that Wise moves money across borders and that traditional techniques are “broken”, slow, inconvenient, expensive, and the process is too opaque. 

When it comes to the second question, Mumtaz believes that one first obstacle is banks’ assumption that a fintechs infrastructure is “built the same way as theirs. Whereas fintechs have the benefit of not having 20 years of legacy technology.” He did point out, however, that while being lean, fintech technology is only built to handle a limited number of issues. In case of Wise, it’s cross-border payments. As a result, both banks and fintechs must understand each other in this sector. 

“Fintechs should spend the time to invest in making it easier for their banking partners to work with them.” 

Taking on the task of green regulation 

Henri Vanhomwegen, Greenomy’s head of product, led one of the day’s final sessions. Greenomy is a Belgian regtech company that specializes in assisting EU companies with sustainability reporting regulations. 

Vanhomwegen began by defining the term “green taxonomies.”

“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.” 

Henri Vanhomwegen

According to Vanhomwegen, the taxonomy has already been applied to 11,000 corporations, but non-financial corporations will be required to present their whole taxonomy exercise by January 2023. By January 2024, all financial institutions would have to meet these requirements. More than 50,000 corporations will be included in the taxonomy by 2024. 

“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 digitized the integrity of that legislation within the ecosystem.” 

Users will be shown the precise criteria they must evaluate in order to demonstrate their long-term viability. The platform will be activated once the company in issue has demonstrated its long-term viability through that “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 developed in response to a report by the EFB and UNEP FI that urged the introduction of such a tool. They operate on the Temenos system. 

Information from Finextra

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