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Q&A: Collaboration is key to unlocking the new wave of banking

Monitise, the financial services technology firm, is riding a huge wave of change in the banking industry. Chief executive Lee Cameron says big banks must liberate themselves from the constraints of legacy technologies and processes to accelerate digital transformation and meet customer demand. He suggests that partnerships with fintechs represent the surest path to making the new wave of banking a reality

How long has Monitise been in the financial technology space?

Monitise was founded in 2003, and since then has worked closely with banks and other regulated financial entities. Starting out as a mobile-only firm in those pre-smartphone days, we were confident we had felt the winds of change coming for the banking sector and we were proved right. We’ve constantly evolved since then to ensure we are providing banks with the solutions and support they need as new regulations and changing consumer behaviours continue to shape the market.

What have been the major developments for retail banks?

Smartphones, apps and instant on-demand services have become the norm. Consumers have been conditioned by fast-growing companies, Uber and Airbnb, for example, to expect a seamless and tailored service at the touch of a button, and offerings from the big banks are being left behind. New challenger “neobanks”, such as Monzo, Atom and Starling, are providing more personal services focused on helping consumers manage their money. These challengers can iterate and innovate much more quickly than the big banks, and are building strong brand relationships, especially among younger consumers.

There have also been regulations such as the payments services directive (PSD2). Then there are the recent Competition and Markets Authority measures on open banking, which will increase competition and transparency by making consumer data shareable with third parties. These reforms will enable banks to improve the experience for consumers, but will also require them to work harder and smarter to retain those consumers as alternatives become clear.
How successfully are big banks meeting these new demands?

For banks, success is ultimately measured in terms of consumer satisfaction, profit and shareholder value. Times have been tough all round, with challenges relating to changing consumer expectations, shifting regulatory demands, competition from new players and the limitations of legacy technologies and processes undoubtedly causing bank chief executives sleepless nights.

There are great teams within banks trying to make innovation a reality that customers can hold in their hands, rather than letting it be stuck internally. But these teams have been dealt a bad hand, both in terms of the legacy systems they have to navigate and when it comes to board-level fear of failure connected to security, risk and compliance. So while consumer demand for digital services is high, and growing all the time, and the appetite is there in banks to meet this demand, the pace of change remains relatively slow.

That’s why we created FINkit®, a bank-grade development toolkit and build-and-run platform, populated with ready-made micro-services to help banks accelerate the development of new consumer propositions in a safe and compliant way.

Are new competitors forcing their hand?

Not yet, but the big banks are certainly paying close attention to new, fast-moving competitors, their total focus on the customer, and their ability to get products to market, learn from feedback, and quickly iterate and improve.

So far, consumer uptake of services from neobanks has been relatively restricted – it’s mainly younger, tech-savvy early adopters. These firms’ ability to pose a real threat will probably be limited by low levels of switching across the board and their unsustainably high cost of consumer acquisition.

Where those businesses could pose a real challenge to the incumbents is in directly targeting the most profitable parts of the banks’ businesses, in which their products or customer experience are weak, such as small business lending or foreign exchange. Banks are right to worry about disintermediation and a future in which they continue to provide core services on top of which specialists sweep in and take the profits and the customer relationships.

Is there a good way for bank chief executives to respond?

Collaboration with fintech startups is emerging as the surest route to enabling innovation and accelerating digital transformation. But before doing anything else, banks need to find a way to free themselves from the limitations of their legacy technologies and processes. Only then will they be able to move at the pace of the new breed of potential fintech partners and collaborate effectively.

Many bank chief executives worry about working with a disruptive competitor, but doing so does not necessarily create a threat. There is potentially a much greater threat in failing to meet consumer demands for these services.

Instead they need to change the way they address digital progress. They must recruit the right people and adopt new ways of working. It is true that chief executives are being pulled in lots of directions, but the best way to respond is through effective work with experts.

Where does Monitise FINkit fit in?

We’re an enabler. With FINkit we provide the platform and toolkit for banks to increase their pace of change and to reduce the cost of developing services and bringing them to market.

FINkit features a range of pre-built micro-services, from us and from our partners, including global financial and information services firms such as Mastercard and Experian, as well as the most innovative fintech firms including BehavioSec and LivePerson, so banks never have to build any new product or service entirely from the ground up. We are then able to plug in our own subject-matter expertise to help banks make the most of the platform.

We are not going to turn up at a bank and claim we can solve all their problems, and chief executives should be wary of anyone who does. What we do is help businesses to build their services so they can engage customers quickly, in a more comprehensive and cost-effective way, working with carefully selected industry-leading firms.

What is the future of your business?

We will continue being a trustworthy company that provides best-of-breed services to support customer-orientated innovation. We will continue to enable banks to accelerate their digital transformation, helping them build, pilot, launch, run, and iterate digital services quickly and continuously, while making sure they do so in a bank-grade, compliant, secure and scalable manner.

To find out how to bring about the innovation your customers demand please visit monitise.com

01 CUSTOMER DEMAND is high and satisfaction is low. The ideas are there, but legacy IT is a major roadblock.

02 REGULATORY PRESSURE is increasing. I’m spending more and more on building systems and processes to keep up.

03 COMPETITION is coming from all angles, increasing customer expectations, while I have to focus on compliance.

04 SHAREHOLDER DISAPPOINTMENT is palpable. Returns aren’t big enough, there’s a lack of new products, traditional customer engagement is falling and financial technology startups are coveting the profitable bits of my business.

05 OUTDATED TECHNOLOGY SYSTEMS are too expensive and difficult to replace. Our core system isn’t fit to deliver the experience, service and product suite my customers expect.

06 CRIMINAL THREAT is worrying and it only gets worse when I think about the new, potentially high-risk technologies I need to drive faster innovation.

07 THE TALENT STRUGGLE makes hiring the best people a daily challenge. My pace of tech delivery is not appealing for millennials wanting to deliver on innovation.

 

What came first, the chicken or the egg? Is anxiety the root of bank chief executives’ sleep troubles or vice versa? What we do know is this: the constant game of “whack a mole” you have to play as a leader in retail banking can leave you feeling physically, emotionally and mentally drained, which can lead to chronic insomnia.

Monitise FINkit has studied the retail banking environment for almost 15 years. Its experts have worked closely with bank chief executives to guide them through technological and regulatory turbulence and have put together a vital guide to restoring a peaceful night’s sleep.

Join us as we explore the wisdom of lifestyle and stress management experts, and guide you through your worries to a peaceful solution.

01 SHARE YOUR WORRIES WITH SOMEONE YOU CAN TRUST. Identify a confidante with unrivalled experience in financial service technology. Someone who creates and runs live services and platforms for banks, used by millions of people around the world every day. A problem shared is a problem halved – and then solved.

02 DON’T WORRY ABOUT “WHAT IF?” FOCUS ON RIGHT NOW. Leave the tools and platforms to the experts, and focus on the products and propositions that are going to drive customer satisfaction. Give your team the tools to develop immediately so you can start seeing the benefits.

03 REDUCE STRESS WHERE YOU CAN. Use a technology system that is bank-grade and PCI DSS-compliant. Demand better security models and lower overheads in the application development life cycle.

04 SURROUND YOURSELF WITH POSITIVE, CAPABLE PEOPLE. Work with best-in-class, build and run capabilities to create one seamless and coherent solution.

05 MEDITATE TO VISUALISE A SERENE ENVIRONMENT. You don’t need to struggle to build from the ground up. Reuse components, embrace industry-leading partners, and execute new ideas quickly and safely.

06 FOCUS ON EXERCISE AND IMPROVE AGILITY. Get from pen to production in days, not months or years and evaluate the results you see being delivered every two weeks.

07 BREAK DOWN THE BIG ISSUES. You cannot quickly or cheaply change your core technology. Instead choose a route that ensures low costs to get started, fixed pricing to test and learn, and “pay as you grow” for operational services.

Never put off until tomorrow what you can do today. Three months from now, you will thank yourself.

Contact the Sleep Doctors at Monitise: sleep@monitise.com to find out how they can help you turn fitful nights into restful ones with FINkit, the bank-grade, secure, trusted platform and toolkit for accelerating digital transformation. Alternatively, visit monitise.com for more information

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