· DISTRIBUTION FEATURE. INSIGHT. Digital-only banking in . Canada: the future is bright, the future is Tangerine? RBC’s MyAdvisor: focus on customer convenience . leads to increas

DISTRIBUTION FEATURE INSIGHTDigital-only banking in

Canada: the future is bright, the future is Tangerine?

RBC’s MyAdvisor: focus on customer convenience

leads to increased AuM

Two months after PSD2, and the Open Banking

revolution is yet to be seen

WHITE SPARK TURNS TO GOLD

DBS HARNESSES THE WINDS OF CHANGE AS IT CELEBRATES ITS HALF-CENTURY

Issue 748 / april 2018w w w. r e ta i l b a n k e r i n t e r n at i o n a l . c o m

RBI 748 April 2018.indd 1 13/03/2018 13:43:06

2 | April 2018 | Retail Banker International

contents

NEWS

05 / EDITOR’S LETTER20 / DIGEST• Digital-only Liv. introduces two features

to mobile app• UK orders independent PRA probe into

Co-operative Bank oversight• RBI penalises Axis Bank and Indian

Overseas Bank• India forms panel to address fintech issues• Skyline National Bank to acquire Great

State Bank• Nubank raises $50m in financing round• Mexican Congress approves new financial

technology bill• ASB to introduce AI-based digital assistant• Current gains investment from Fifth Third• Carney calls for cryptocurrency regulation• HSBC allows banking in 10 currencies• Virgin Money plans digital bank

07

this month

Editor: Douglas Blakey+44 (0)20 7406 6523

[email protected]

Senior Reporter: Patrick Brusnahan

+44 (0)20 7406 [email protected]

Junior Reporter: Briony Richter+44 (0)20 7406 6526

[email protected]

Group Editorial Director: Ana Gyorkos


Sub-editor: Nick Midgley+44 (0)161 359 5829

[email protected]

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+44 (0)20 7406 6592 [email protected]

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[email protected]

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DBS REACHES 50 COVER STORY

follow RBI on twitter@retailbanker

22

RBI 748 April 2018.indd 2 13/03/2018 13:44:08

www.retailbankerinternational.com | 3

contents

April 2018

11 / BUDDespite dire warnings, it is looking increasingly likely that banks will be making the early running when it comes to demonstrating the potential of Open Banking, argues Bud’s Patrick Frith

18 / AVALOQImagine a market of pure customer data liquidity, where financial institutions and tech firms can access, exchange and use authorised consumer data seamlessly. Who will be the winners and losers? asks Jiten Varu

19 / GFTIt has been almost two months since PSD2 came into effect, and the Open Banking revolution is yet to be seen. Christian Ball looks at how banks can deliver the benefits to their customers – and to themselves

24 / DEALFLOCan you compete with Amazon? That is the real question banks should be asking with the introduction of Open Banking. The big issue is not security, it is banks’ disintermediation from customers, writes Abe Smith

26 / PILLSBURYBenjamin Disraeli was probably not referring to iPhone technology when he declared: “Change is inevitable, change is constant.” However, his quip could easily apply to the tech sector, writes Pillsbury’s Sam Pearse

16 / TANGERINEMark Nicholson, Tangerine’s VP of client experience, says the bank’s redesigned website, introduced last September, was the most fundamental change since the bank’s launch in 1997. Robin Arnfield reports

DISTRIBUTION

INDUSTRY INSIGHT

16

14 / STONEWALLStonewall has released its top 100 employers for 2018, celebrating those who have made positive steps forward in creating a safe and open work environment for LGBT employees – but where are the banks? asks Briony Richter

25 / BANKING DATAData analytics has made monitoring customer demands and trends significantly easier; however, many banks are failing to fully utilise the information in their own databases. Briony Richter looks at new research into the area

ANALYSIS

06 / CHETWOOD BANKAnother week, another new bank launches in the UK – but Chetwood Bank arrives with more than your standard startup, bringing £150m in investment and a banking licence. Patrick Brusnahan speaks to its co-founders

07 / DBSRecord earnings, impressive market share gains, and a growing worldwide reputation for best-in-class customer service and digital banking make for a very happy 50th birthday for DBS. Douglas Blakey reports

10 / TEMENOS2018 is set to be an exciting year for Temenos. Product strategy director Adrian Hadley, chief product officer Mark Winterburn, and North America division president Emily Steele speak to RBI about new roles and what is in store

12 / RBC MYADVISORRBC’s MyAdvisor tool enables clients to connect with live advisers through the channel of their choice. Since its launch last year, RBC has seen significant growth in assets under management. Robin Arnfield reports

FEATURES

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RBI 748 April 2018.indd 3 13/03/2018 13:44:24

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editor’s letter

A happy 50th for DBS as digital investments pay off

Douglas Blakey, Editor

With eight awards on the evening, DBS stole the show at the ninth annual RBI Asia Trailblazer Summit and Awards.

‘Engage customers digitally and they buy more products and services and cost less to serve’ is a quick summary of the DBS strategy.

DBS’s mortgage customers and credit card customers are roughly three times as profitable as customers who use only the branch channel.

DBS estimates that its digital clients’ cost-income ratio is in the low 30s, against the mid-50s for traditional customers. Its digital customers’ return on equity is pushing 30%.

In this issue, we look at a number of the reasons for DBS’s success, including an interview with the bank’s celebrated head of innovation, Neal Cross (see page 7).

It was a good night too for UOB, taking home six awards, while Standard Chartered, Citi and Maybank all pocketed multiple awards.

The annual RBI Asia Trailblazer Awards bring together

the most outstanding and innovative institutions and projects and highlight the initiatives developed in the region’s retail banking industry.

The categories were created keeping in mind different geographies in Asia and its unique needs. The Asia Trailblazer awards provide a platform for participating institutions to showcase and evaluate avenues for growth and innovation.

The retail banking sector in Asia continues to thrive with new and innovative solutions. Both banks and vendors are constantly reinventing their strategies and product offerings to respond accurately to the ever-changing needs of consumers. The RBI Awards facilitate those offerings that have managed to stand out from the crowd.

The panel of judges brought in fresh industry expertise and long-standing knowledge of Asia’s retail financial services industry. The judging panel was actively involved in the evaluation process guaranteeing the independence and transparency of the programme. <

2018 RBI Asia Trailblazer Award winners by categoryPRODUCT AND SERVICEExcellence in Mass Affluent BankingWinner: Standard Chartered Bank Singapore

Excellence in Service InnovationWinner: Alliance Bank Malaysia Bhd

Excellence in SME BankingWinner: DBS Bank

Best Initiative in Financial inclusionWinner: Ngern Tid Lor Company

Best Mortgage OfferingWinner: CTBC Bank

Best Loan OfferingWinner: Security Bank Corporation

Best Savings Plan OfferingWinner: UOB

Best Card OfferingWinner: General Card Services

Best Payment InnovationWinner: UOB

Best Retirement Product and Service InitiativeWinner: UOB

PROCESS AND STRATEGYExcellence in Loan OriginationWinner: Taishin Bank

Excellence in Client On-Boarding and CommunicationWinner: Standard Chartered Bank Korea

Excellence in Business Model InnovationWinner: Alliance Bank Malaysia Bhd

Dynamic Third-Party CollaborationWinner: Kasikorn Bank

Best Innovation ProgrammeWinner: DBS

Excellence in Customer-CentricityWinner: OCBC

MARKETING AND COMMUNICATIONBest Social Media Marketing CampaignWinner: Citibank Singapore

Best Digital Marketing CampaignWinner: Citibank Singapore

Excellence in Internal CommunicationsWinner: United Overseas Bank

Excellence in Social Media – Customer Relations and Brand EngagementWinner: Taishin Bank

Best New Product Service or Innovation LaunchWinner: Standard Chartered Bank Malaysia

Best Loyalty ProgrammeWinner: Citi Malaysia

Most Creative Marketing CollaborationWinner: UOB

Best Marketing Campaign – OverallWinner: Citibank Singapore

Channel Innovation AwardsMost Innovative Branch OfferingWinner: DBS

Best ATM InnovationWinner: CTBC

Excellence in Internet Banking – OverallWinner: DBS

Excellence in Internet Banking – Cross-BorderWinner: Standard Chartered (Singapore)

Excellence in Mobile Banking – OverallWinner: UOB

Excellence in Mobile Banking – CustomisationWinner: PT Bank CIMB Niaga

Best App for Customer ExperienceWinner: Union Bank of the Philippines

Best Mobile Wallet InitiativeWinner: Maybank

Best Multi-Channel OfferingWinner: Standard Chartered Bank (Singapore)

Excellence in Omni-Channel IntegrationWinner: DBS

PEOPLEBest Staff Training and Development ProgrammeWinner: Maybank

Excellence in Employee EngagementWinner: DBS

Best CSR InitiativeWinner: Maybank (Cambodia)

TRAILBLAZER AWARDSTrailblazer 2018 – InstitutionWinner: DBS

Trailblazer 2018 – IndividualWinner: David Gledhill – DBS

RBI 748 April 2018.indd 5 13/03/2018 13:44:45


feature | chetwood bank

Founded by Andy Mielczarek, former deputy head of HSBC’s UK retail bank, and Mark Jenkinson, who has

had stints with Temenos and Capco/FIS, Chetwood needs to do a lot to stand out in the increasingly congested marketplace.

The differentiator here is a focus on products rather than experience.

PRODUCT VALUEMielczarek explains: “One of my frustrations in my years of working on products was how hard it was to change products in a traditional bank, because the technology is so big, old and unable to change.

“What we think we’re doing differently is to start really focusing on the manufacturing of the product. We can do it quite quickly, and the best way to do things differently is to start from scratch and use brand new technology to do the unfashionable business of ‘how do we do products?’

“A lot of folks are releasing new apps and new experience, but under the hood they’re pretty much the same products that they always have been.”

Loans and lending products are Chetwood’s main area of expertise, and Mielczarek wants to deliver “dynamic products” for “dynamic customers”.

He adds: “We wanted to have a really flexible architecture which would then allow us to do all the things you need to do to lend customers money, but in a separate, modular, modern way.

“The way the market works today is they look back at six or seven years of how you behave, then crystallise a view of your creditworthiness, and that stays with you

for the whole life of the product. We think all three of those are wrong in the modern world.”

Chetwood wants to have regular up-to-date looks at credit risk, which can evolve over time. As it changes, so does the product. The goal is to have “hundreds of different price points” and each customer can be priced specifically.

PARTNERSHIPSWhile many startups announce plans and intentions before receiving a licence or funding, Chetwood already has these.

Mielczarek states: “We won’t be on the road fundraising every couple of months, and we can focus on customers.”

Lending is also possible because of its already-acquired £150m ($208m) of debt and equity investment. Post-mobilisation, Chetwood will then launch retail deposits.

However, the bank is not trying to compete with others, at least not in the traditional sense. Describing it as a “B2B2C business”, the co-founders want to partner with other firms that have a user base and offer their products to their customers.

Jenkinson says: “The old model of getting customers, trying to get them to stay and try to cross-sell them as many products as possible is not our model. Our model is to create a great product and get it out to as many people as we think that product serves.

“The importance of that in this world is that we’re not trying to build a massive customer following in a Monzo style to sell them different things and make money at some point. Our products stand alone, and have to be able to stand alone.

“It’s a different model to traditional banking. We believe that if we can manufacture the product, there will be many distributors of those products. People are building marketplaces and apps for education or money management, and all of them want a product. We don’t want to be the Amazon of banking: we want to be the product on the Amazon of banking.”

RELATIONSHIPSMany in the financial sector do not mind collaboration as long as they are the ones that own the customer relationship. Chetwood is aiming for something else: “the product, not the relationship”.

“Philosophically, we are not trying to own customers,” Mielczarek explains. “We believe, in today’s day and age, nobody owns customers anyway.”

Jenkinson adds: “It’s a dying journey. It’s a declining trend and we’re trying to work against that. You can have a great product with a great experience, but once they don’t need that product, you’re not in their lives. The problem with banking is that it tries to be in your life when it offers substandard products.”

One thing that is clear is that the team behind Chetwood wants to be a bank. Many newer players do not see a banking licence as necessary to serve customers.

Mielczarek concludes: “I know people that have spent a lot of time finding creative ways around regulation and avoid becoming a bank. Our experience has been positive through the regulation and working with the regulation. That is there to protect customers and we want to do that too. I don’t see being a bank as a problem at all.” <

Chetwood Bank: dynamic products for dynamic customersAnother week, another new bank launches in the UK. This time, Chetwood Bank arrives – with more behind it than your standard startup, as it brings £150m in investment and a banking licence. Patrick Brusnahan speaks to the bank’s co-founders to see if Chetwood can offer something that does not already exist

RBI 748 April 2018.indd 6 13/03/2018 13:44:48


DBS is set for a very happy 50th birthday – and with good reason. Its full-year earnings for fiscal 2017 rose by 4% to a record S$4.39bn ($3.34bn), boosted by a 4% rise in

income to a record high of S$11.9bn.Underlying loans rose by 9%; including loans from the consolidation

of the ANZ acquisitions, the rise was 11%. Total deposits also rose by 11% for fiscal 2017, including ANZ consolidation, and by 8% on an underlying basis.

Fee income grew by 12% year-on-year, while productivity gains from digitisation and cost management initiatives contained expense growth to only 3%.

Market share gains included a 2.1-percentage-point rise in Singapore mortgage loans to 30.8%; around 120 basis points came from ANZ and almost one percentage point came from DBS’s organic business. As for deposits, DBS continued to have more than a 50% market share of Singapore-dollar savings deposits.

Card growth was also strong, with DBS’ Singapore credit card receivables market share up from 20% to 25%; while around 3-3.5 percentage points came from ANZ, around 1.5 points of the rise arose from organic growth.

ANZ ACQUISITION ON SCHEDULEDBS kicked off the migration of the wealth management and retail banking businesses acquired from ANZ in Singapore, Hong Kong, Mainland China, Taiwan and Indonesia in July 2017.

The aim was to complete the acquisition in all markets by early 2018, and the new year started well, with the completion of the migration of ANZ’s Indonesian lending book onto the DBS platform to wrap up what is a major banking deal.

The ANZ deal was first announced back in October 2016 when DBS agreed to acquire the ANZ retail and wealth business units in the five markets – loans of around S$11bn and deposits of S$17bn – for around S$110m above book value.

DIGITAL SUCCESSDBS’ digital highlights in 2017 included the launch of the world’s largest banking API platform to create ecosystem partnerships and offer differentiated customer experiences.

DBS was the first bank to develop methodology to measure digital value creation, driving traditional to digital conversion; by the end of 2017 two-thirds of its applications were cloud-ready, and that number will rise to 90% by the end of 2018.

In a call with analysts, DBS’s CEO Piyush Gupta said: “The digital part of the business is giving me a 27% ROE, compared to 19% for non-digital. Last year, we shifted 250,000 customers into digital; our goal is to try and shift another 250,000 this year.”

DBS’s digital success is no accident – it has invested more than S$5bn in recent years to develop its IT platform, and from re-engineering its technology infrastructure to transforming its front end, the aim is “to become digital to the core”.

Said Gupta: “In credit cards, wealth and SME, we make it simple and easy for customers to engage with us digitally. Coupled with a focus on agile methodology and journey thinking, we have been able to improve speed to market and the customer experience.

“This translates to more digitally engaged customers, as well as higher returns per customer. In particular, consumer banking and SME customers who engage with us digitally account for two times more revenue, on average, than other customers.”

DBS now has more than three million online and almost 2.5 million mobile banking customers, while in the SME sector, more than 60% of customers start their relationship with DBS digitally.

Looking ahead, DBS is continuing to invest heavily, especially as regards data optimisation. Gupta said: “We’re making a big effort this year on data. We’ve done a lot of work on digital but data is one area where I think we need to do even more. We’re making a massive effort to re-architect all our data. We’re almost complete with a project on big data – we have huge new data architectures.”

feature: dbs

Record full-year earnings for fiscal 2017, impressive market share gains, and a growing worldwide reputation for best-in-class customer service and digital banking combine to make for a very happy 50th birthday for DBS. The prospects for its

golden jubilee year are equally positive, reports Douglas Blakey

dbs: golden jubilee year off to flying start

RBI 748 April 2018.indd 7 13/03/2018 13:45:22


feature: dbs

For fiscal 2018, DBS forecasts lending growth of around 7-8%, with low double-digit growth in income with its cost-income ratio remaining at around 43%.

NEW YEAR, NEW LOOKIn celebration of its 50th anniversary, DBS has a new look. Unveiled on 5 March, DBS employees are sporting new uniforms by celebrated Singaporean designer Phuay Li Ying of Ying the Label. The uniforms feature distinctive print patterns taken from an abstract watercolour art piece with red and black brushstrokes.

DBS’s 24,000 employees across its 18 markets are also receiving gold-plated cufflinks and necklaces, dubbed the DBS Sparks collection, as part of the birthday celebrations, modelled after the spark found at the heart of the DBS logo.

In a statement, DBS’s head of strategic marketing and communications, Karen Ngui, said that DBS’s staff embodies the DBS Spark, representing the “spirit of imagination, the sense of possibility and the courage to make things happen”. <

A Digital TrailblazerDBS enjoyed a successful evening at the ninth annual RBI Asia Trailblazers awards in Singapore on 1 March (see page 5), collecting eight awards, including the senior categories of Trailblazer of the Year, both for the individual and institutional awards.

While Neal Cross would the first to acknowledge that the bank’s digital success is very much a team effort, his role as MD and chief innovation officer at DBS cannot be underestimated. RBI editor Douglas Blakey sat down with Cross during the Trailblazer summit to discuss some of the reasons why DBS is widely regarded as among the most innovative banks in the world.

Douglas Blakey (DB): I heard you say recently that Singaporeans need a bigger risk appetite; can you expand on that? Neal Cross (NC): Singaporeans can do better. It is all to do with the risk-taking appetite. Singapore is a lovely place, a safe place, but innovation tends to occur in places where there is some stress.

Life is too good in Singapore. You have to generalise, but if you look at places where there is the greatest innovation, it is places with stress, such as Israel – per capita the most innovative place on the planet. Taiwan and South Korea – there is some stress there, and the same in China and Japan.

We need to understand that Singapore needs greater impetus to be a nation of innovators, but there is increasing interest around transformational change. There are the accelerator programmes, and kids as young as age eight to 10 are being taught about innovation.

DB: Can I take you back to when you assumed your current role? You took a very different route to many major banks; a lot of your development has been in-house as opposed to the outsource route, for example.NC: We actually do the complete opposite of everyone else. Sometimes if you just do the complete opposite of something it works better than doing it the normal way round.

For example, we never hire tech people. So we are one of the few innovation groups I know with no capital resources. We do not hire any experts. We do not hire bankers. Also, we never invent anything. My goal every year is to invent zero.

It is an easy metric to hit, but how do you overachieve on that?

DB: That is a deliberate strategy – to invent nothing?NC: Yes, absolutely. Most innovation groups tend to last about two years and they fall into a number of traps. One

is that they think that innovation has something to do with technology. For us it is about cultural transformation. I started with three people and now have more than 30 across four locations across Asia. For us, our job is about making the whole bank the innovation group.

If I can inspire, educate and motivate 24,000 people to do their careers’ best work, that is a lot more powerful than 14 innovation experts playing with tech and delivering a new product or service.

DB: How do you about getting products to market?NC: A lot of innovation groups work in a silo. The biggest problem in innovation I see is getting products to market. We do not actually have that problem. About 95% to 98% of everything we do goes into production.

That is because we are not going to the business saying ‘we have created this cool thing’, which is just like saying ‘hey

RECORD EARNINGS

FY 2017 FY 2016 ChangeNet interest income 7,791 7,305 7%

Non-interest income 4,133 4,184 -1%

Total income 11,924 11,489 4%

Expenses 5,130 4,972 3%

Profit before allowances 6,794 6,517 4%

Net profit 4,390 4,238 4%Source: DBS

FUNDAMENTALS

FY 2017 FY 2016Net interest margin 1.75% 1.80%

Cost income ratio 43% 43%

Loan/deposit ratio 86% 87%

NPL ratio 1.7% 1.4%Source: DBS

RBI 748 April 2018.indd 8 13/03/2018 13:45:38


feature: dbs

business, we are better than you – look what we did better than you.’ That is what can happen, so you can get some push back.

So we go to the business and ask ‘what are you trying to deliver this year? What is your KPI? What does success look like? How can we make this even better? And how can we help you?’

Over time, as you build relationships and get respect from a particular division, they start to want to be more ambitious. They ask for advice and look at some of the tech trends and ask ‘what do think about the relevance of branches? And what do you think about artificial intelligence?’

Then suddenly we are in partnership with the business and we are trying to help them achieve more than they have ever done before. That is what we find is a better way to operate an innovation group than some of the standard methods that we see in the market.

DB: I recall in a past interview you hammered home the message that banks should not be afraid to fail. How did you get that message across to your DBS colleagues?NC: To be a chief innovation officer there are a few things you have to realise.

One is that you have no more career prospects. You are done. You are not going to move on to another job in the organisation. Your job is to get fired slowly while effecting change, and once you accept that fact then you can come out with bold statements. You have to build the culture of experimentation. I worked at major tech companies most of my working life.

There are three big differences I see between a tech company and a big corporate such as in finance. One is around collaboration. Banks are very hierarchical. You do what your boss tells you. You only work in your small team. You do not work with other teams or outside entities or startups when I first joined.

The second thing is around risk appetite. Banks are schizophrenic, they are very risk-averse – it is hilarious. In the investment arm, they will happily lose tens of millions of dollars on some bet to make hundreds of millions. At

the same time, internally, heavens forbid we try something new or innovative!

Banks can price and monetise risk on the one hand, but on the other, when risk involves some kind of internal change, they are very risk-averse, whereas tech firms are experimental and will try things and occasionally fail.

The third big difference is around partnerships, ecosystems and ownership. The bank owns everything, such as its ATMs branches, products, and tech stack – even if outsourced, whereas a tech firm is more like a platform.

We do not have to own everything. The biggest companies in the world own very little because they have a partnership model.

DB: Why then did you choose to work with DBS?NC: This is my first and last job at a bank, even though it pays very well. I never wanted to work for a bank; I would not do this again.

I have had offers from many banks, but I said they are too political and have an aggressive outlook. DBS was different, and so the first thing I created was my own culture bubble.

I brought in very different people to come and work with me: people from industrial design, sales people, advertising people, and once we created the bubble we tried to change the bank culture to be more like our

culture. If I am going to live in a bank, I am going to bring my culture to work, like you bring your own laptop. Over time, slowly, the culture is changing to be more like a tech company.

Is it a tech culture yet? No, but is it a fully bank culture? Actually no – it is somewhere in between. It takes a long time but I am happy with the progress to date.

DB: Any threats? Anything keep you awake at night?NC: It does not keep me awake at night but my personal belief is that banks may have lost the consumer payments battle – it is only a matter of time.

The people who will own finance in the future are Alibaba, Tencent, Google, Apple, Amazon, Facebook. We need to rethink our strategies where maybe we do not own the payments.

The tech giants do not want to make money from finance – they make money on the data, but it is not a level playing field. They have the best brains in the world, billions of dollars in the bank. It is hard to compete with business units of the tech giants that can afford to run at a loss.

DB: So, should leading banks look to partner with the tech giants?NC: I can see a time when you are on Amazon and a drop-down list of a few major banks appears.

Put a 1 in front of your name, so you come top – maybe we should rebrand as 1DBS! <

Neal Cross, DBS (right) with RBI editor Douglas Blakey

RBI 748 April 2018.indd 9 13/03/2018 13:45:47


feature | temenos

Temenos’s T24 core banking platform enables banks to move away from outdated legacy systems to a

centralised, core banking infrastructure.The platform’s code is upgraded every day

and thoroughly tested. Winterburn speaks about T24 and its updated release in April: “Every three months we have a bigger update. The main release for each client bank will vary – not every banking client receives its main annual upgrade in April.

“The relevance of April and 2018 is that that upgrade coincides with Temenos’s Annual Maintenance Review.”

NON-STOP OPERATIONST24 is a real-time, 24/7 system which allows non-stop banking operations. The number of legacy applications can be reduced significantly, bringing down operational costs.

Hadley talks further on what is coming up in April: “We have a very strong central product catalogue, product management and servicing tool which cover virtually all of the products in T24, certainly all of the retail and corporate side and we are expanding that.

“So, as an example, a retail bank may want to sell insurance policies alongside its current account, or maybe wants to bundle those in packages with loans. Now a bank client can define those insurance products within T24, and register the fact that a customer has that insurance product and be able to put it into a product package.”

The flexibility offered by T24 enables banks to react quickly to the changing trends of consumers and to new market opportunities, giving banks using T24 an edge over their competitors.

Hadley continues: “Thirdly – and this is a big one because we have been working on this for the past 18 months – it is a new, generic origination platform.

“It is a big and exciting development, because it gives us an origination capability in the front office for all the products defined in the Temenos product catalogue, and includes the external products that I just mentioned.

“It will be attractive not just for existing clients, but will appeal to a number of future clients. A lot of banks are looking for front- office systems, and origination is a huge part of that,” Hadley adds.

NEW PRESIDENTTemenos prides itself on its dynamic workforce and this is reflected in its appointment of Emily Steele as president of its North American division.

With over 20 years in the financial industry, Steele has a wealth of experience behind her. Before taking on this new role, Steele was COO of Temenos in North America. In this role she oversaw all day-to-day business operations for several market segments.

As president of the North America division, Steele will be in charge of the region’s profit and loss statement, and lead the company’s North American field go-to-market efforts. Creating an effective market-approach strategy requires in-depth knowledge of the market and a strong network of partners.

With over 2,000 client businesses across the world, Steele states that she plans to go after even more tier 1 banks.

“Our target is the top 120 banks in the US. We are always looking for clients that want a banking technology provider that can really

future-proof them. We are the provider that will make sure technology is keeping pace.”

ACQUISITIONSTemenos has made impressive headway in its North America focus. In 2013 it acquired Trinovus, a software-as-a-service technology provider, creating the US division. Continuing its journey, Temenos acquired Akcelerant in 2015, giving it additional presence in North America.

This year Temenos landed a transformational deal, reaching an agreement to buy UK-based trading technology supplier Fidessa. Temenos will pay Fidessa investors £35.67 ($50) for each share, a gain of nearly 37% to the firm’s closing price in the middle of February.

With both companies being leaders in banking software, the takeover creates an opportunity for Temenos to build further towards becoming the global leader in financial services software.

Temenos plans to generate more revenue by cross-selling Fidessa products to its own clients, bringing its back-office infrastructure to Fidessa’s front-office product offering in the capital market segment, and cross-selling Temenos products to Fidessa clients, with a particular focus on customers based in the US and Japan.

With all these developments, how will Temenos keep up with the competition? Steele notes: “I like competition. There is room for all of us. I wouldn’t say we are trying to keep up with the competition. We stay in our own lane; we are a product company focused on providing financial institutions, of any size, software that can really thrive in this digital age.

“We are highly focused on our partner relationships. There is an absolute focus on gaining more partnerships and finding those who want to go on this journey with us.”

VALUABLE INSIGHTFor banks, Temenos can offer unique products to improve customer relations and drive business strategy. T24 can provide banks with valuable insight by delivering real-time customer information.

Although the core system is identical for every bank that uses it, T24 is always upgraded to meet the individual needs of banks. Already making incredible headway in the early months of 2018, Temenos is most definitely one to watch. <

TEMENOS: SETTING ITS SIGHT ON A NEW VISION2018 is set to be an exciting year for Temenos. Product strategy director Adrian Hadley, chief product officer Mark Winterburn, and North America division president Emily Steele all speak to RBI about new roles and what is in store

RBI 748 April 2018.indd 10 13/03/2018 13:45:50


industry insight | bud

Ever since the very first utterance of the phrase ‘Open Banking’ there has been speculation about what this

might mean for our banking system.The banks had built a position that was

hard to contest, defended both by their ownership of data and the technical difficulty of processing it. For years previously, the falling price of processing power had busily eroded the defensibility offered by banking ‘systems’, but ownership of data had looked to be the banks’ pocket ace.

As the Open Banking vision took shape, people could see how smaller, more agile tech companies could make genuine inroads into

the primary relationship between people and their money, and as the 13 January deadline came closer, the excitement among the potential benefactors of the new data regime became palpable.

The reality has been far more measured. Ignoring the extensions granted to the majority of the CMA9 – the leading nine banks in the UK – the complexity of delivering on the promise of a connected financial experience represents an immense challenge, and one for which open access to APIs is not a panacea.

At Bud we have been granted both of the new licences (AIS and PIS) on top of our previous regulatory permissions, allowing us to introduce and arrange a financial marketplace. In essence this gives us the end-to-end permissions to realise the concept of ‘marketplace banking’.

Permission aside, though, the actual delivery of the concept will doubtless involve a deep collaboration with banks and financial service providers. In fact, the more we explore the possibilities that these licences open up for us, the more it becomes clear how vital collaboration with banks is going to be when it comes to delivering the new experiences that Open Banking allows.

This is easy to say in principle, but there are concrete examples. One of the most commonly quoted use cases for Open Banking technology is the idea that a financial manager app could know when you are paying too much for gas and electricity, and could switch

you to a new supplier with very little effort. Even a basic implementation like this looks like it will be impossible without some form of partnership with a bank.

The payment-initiation tools that the Open Banking APIs provide are brilliantly useful, but they are – quite rightly – limited. You cannot, for example, set up a new payee as a third party. The customer would have to log in to their banking app separately, and in doing so dramatically increase the level of friction in the experience. There may, of course, be ways to address this issue, but not in the absence of a set of shared goals with a bank partner.

In fact, in the short term, the new tech is probably more readily used entirely in an internal context by banks. The capacity to do easy transfers internally using a third party with the payments licence has a clear business case, and is easy to implement.

Our work with HSBC and first direct is the first step for any regulated Open Banking

company working with a bank to show what these in-phone financial

experiences will look like.Artha, the first direct

and Bud collaboration, will show first direct and non-first direct customers how they are spending their money. It will also have third-party

services – products that are non-first direct products

– within it. Customers will be able to use these services to invest

their money or switch their bill providers for better rates.

In the future, as these Open Banking experiences – and their value – become more mainstream, we envisage your bank being the place where you interact with anything money-related, from bill switching to obtaining a new travel insurance policy.

Bud’s work is entirely geared around moving the industry this way so everyone benefits from Open Banking – providing much-needed assistance for customers when making financial decisions, reach and distribution for financial service providers, and time and attention maintained within the bank’s ecosystem.

I do not doubt that, in the medium term, entirely standalone solutions will find interesting and engaging things to do with Open Banking data, but in the short term, if you are looking for new financial experiences, it is probably a safer bet to look to your bank and the collaborations they are pursuing. <

Despite dire warnings for banks, it is looking increasingly likely that banks will be making the early running when it comes to demonstrating the potential of open banking, argues Patrick Frith, head of operations at Bud

startups or banks: who gains from open banking?

Open Banking Licences explainedThe introduction of Payment Services Directive 2 (PSD2) and the Competition and Markets Authority (CMA)’s Open Banking standards has resulted in the creation of two new licences for third-party providers.

The Account Information Service (AIS) licence allows third-party software to read spending data via the bank’s Application Programme Interface (API).

The Payment Initiation Services (PIS) licence allows third-party software to initiate payments via API to pre-authorised payees.

Both licenses require the explicit consent of the customer. <

RBI 748 April 2018.indd 11 13/03/2018 13:46:02


feature | rbc myadvisor

MyAdvisor is part of RBC’s strategy of creating a digitally enabled relationship bank.

This involves integrating digital, physical and advisor capabilities across RBC’s branch network, and enabling clients and staff to interact more seamlessly with RBC’s digital and physical channels, RBC says.

MyAdvisor was originally developed with support from BCG Digital Ventures, and refined through RBC’s innovation lab in Toronto.

ACCESS TO EXPERTSMyAdvisor clients are provided with access to a team of financial experts at no additional cost. They choose how they want to receive advice – online, over the phone, by videoconference, or, from April 2018, in person at an RBC Canada branch.

The RBC advisors behind MyAdvisor are trained to work with the financial tools integrated into the online advice platform. Clients can track the progress they are making toward achieving their savings and investment goals, which could be saving for their children’s education or other lifestyle objectives, via MyAdvisor’s interactive dashboard. Clients also have the convenience of signing documents digitally, which enables virtual interaction between clients and advisors.

Clients and advisors see the same information on-screen. Any adjustments made on either side are viewed in real-time, as the

client and advisor discuss the financial future the client envisages, RBC says. The platform is updated continuously on a bi-weekly basis.

TARGET SEGMENTS“MyAdvisor is aimed at any of our mass retail and mass affluent customer segments,” Richa Hingorani, senior director, digital strategy at RBC Mutual Funds Distribution and RBC Financial Planning tells RBI. “Our initial pilot in early 2017 just offered MyAdvisor to wealthier mass affluent customers who didn’t have a financial advisor.

“But, once we went into pilot, we saw good adoption from the mass affluent segment

as they found value in working with an adviser. Then we opened this experience up to younger, mass retail clients and found that they were also getting benefits from MyAdvisor – they were starting to plan for their future and wanting to connect with an advisor.”

DRIVERSCanada has a new set of financial regulations – Customer Relationship Model 2 – which require wealth management firms to provide greater transparency about their charges – not just the percentage value of fees, but also their dollar value.

These regulations provided a key driver for introducing MyAdvisor, as it gives clients greater transparency into their investments.

Another driver is the wider change in client preferences for how they interact with financial service providers, for example via digital technology such as smartphones, iPads and laptops. Customers are increasingly busy, especially millennials, so they want the convenience of digital technology for managing their investments, explains Hingorani.

In addition, the wealth management market is experiencing competitive digital disruption due to the advent of fintech companies that offer robo-advisory services in Canada. While there is a clear distinction between self-directed (DIY) investing and full-service advice, these disruptive new entrants are beginning to fill a gap in the space.

Royal Bank of Canada (RBC) has developed MyAdvisor, which enables clients to connect at their convenience with live advisers through their channel of choice. Since its launch last year, RBC has seen significant growth in assets under management. Robin Arnfield reports

rbc myadvisor combines human advice with digital experience

myadvisor: a brief historyMyAdvisor has been in the market for over three months now.

One in six clients who signed up for MyAdvisor have completed a financial health consultation with an advisor and activated their personalised plan.

• MyAdvisor clients’ assets under management grew by 8.1% versus 5% in the control group;

• RBC’s early pilot indicated that 85% of clients had more positive impression of RBC, after they had their meeting with an advisor through MyAdvisor. <

RBI 748 April 2018.indd 12 13/03/2018 13:47:41


feature | rbc myadvisor

SURVEYBefore launching the pilot in January 2017, RBC carried out a six-month ethnographic survey.

“We wanted to see if our clients were getting value from their end-of-year investor financial statements,” explains Hingorani. “The research showed that clients were willing to pay the fees for their investments if they were justified in terms of the value the clients were receiving.”

She adds that the ethnographic research which led to the creation of the MyAdvisor solution found that, when it comes to solving complex financial needs – especially retirement, clients trust human advisors. Also, the research showed that clients across all segments need help with saving, planning and investing for their financial future.

“Using a ‘build, measure and learn’ approach, we listened to our clients during the pilot, and then nationally launched the platform in Canada,” says Hingorani. “Additionally, we implemented a co-located agile lab that included key stakeholders such as compliance, technology, and human-centred designers to allow us to build new features for our clients. MyAdvisor is released every two weeks with product enhancements and new features.”

She notes that the team worked hard to make sure that all aspects of the bank come together in MyAdvisor – such as compliance, technology, and marketing.

“We work as one team in terms of strategy, marketing and regulatory frameworks. Being the first in RBC with its fast, iterative approach and bi-weekly releases, MyAdvisor is now being leveraged to educate others in the bank on its approach and learnings. The external relationships developed also are helping to pave the road for other ventures in evolving the way we do business.”

ROLLOUT IN THE BRANCHESIn April 2018, RBC plans to roll out MyAdvisor across its branches in Canada to offer in-branch consultations with advisors.

The next step will be to offer MyAdvisor Xpress, a version of the platform with limited advisor functionality, to members of group pension schemes so they can view their defined-contribution pension plans. This will help them see the effect of contributing early on to their pension plans, Hingorani says.

RBC will also offer MyAdvisor Premium to mass affluent clients who already have

a financial planner in order to deepen the relationship between the client and the adviser. MyAdvisor Premium will enable these clients to discuss holistic, complex topics like estate and income planning during retirement. In addition, in the future version of MyAdvisor Premium, there are plans to leverage MyAdvisor for high net worth clients.

BENEFITSBeing able to view the dashboard with their advisor makes clients better informed about their own finances, says Hingorani. They can then discuss the advice they are given by the advisor in a more educated fashion. Also, the adviser can spend more time talking to clients about their advice rather than inputting their data into the system.

When a client first starts to use MyAdvisor, they are sent an invitation to answer a few simple questions in order to generate their financial picture.

Clients are also prompted for an initial consultation with an advisor to help them complete a personalised plan with recommendations on how to achieve their goals. Currently, they can only fulfil the purchase of investments such as mutual funds or savings products when they connect with an advisor.

“As MyAdvisor is made available to branch advisors, they will also be able to identify opportunities and fulfil on other needs including bringing in the right partners to help the clients,” Hingorani says.

The platform includes an AI-based personalisation engine that captures the client’s financial data and sends them personalised automated alerts and updates about how their investments are performing compared to the goals they set. The personalisation engine also reminds them about talking to their advisor regularly, especially as a result of situations such as fluctuations in market or key life events.

There is no additional fee to the client for using MyAdvisor. They receive the service free of charge as a result of being an RBC investment client, says Hingorani.

She adds that MyAdvisor is already demonstrating clear benefits to clients. “We’ve found that clients using MyAdvisor have seen their assets grow by 8.1%, compared to a control group of similar clients without MyAdvisor who had growth of 5% – a 60% net increment on the client side,” she says. <

Richa Hingorani, RBC

Analyst comment“I like the look and feel of the MyAdvisor platform,” says Will Trout, head of wealth management research at Celent, a division of Oliver Wyman.

“The launch of MyAdvisor speaks to the ongoing hybridisation of wealth management services in Canada and elsewhere in the world. In other words, the line between digital advice and real-life interaction continues to be blurred,” Trout continues.

“A platform such as MyAdvisor lowers delivery costs for the advisor, and makes interaction more convenient and accessible for the end client.

“At the same time, face-to-face, ‘real-time’ interaction lends itself to higher-level discussion around goals, retirement, de-accumulation, and other planning considerations directly relevant to an ageing population.

“As such, MyAdvisor is far more resistant to commoditisation than a straight-up robo-advisor proposition centred on portfolio manufacturing and monitoring.

“Note that Vanguard, with its Personal Advisory Services, has been very successful in rolling out a similar model in the US.” <

RBI 748 April 2018.indd 13 13/03/2018 13:48:51


analysis | stonewall 100

It has been over 50 years since the Sexual Offences Act in 1967, but has there really been enough progress?

Building an inclusive culture within the work place is a journey that requires a functioning network with clear aims and a continued dialogue so everyone can communicate positively.

Achieving top spot on Stonewall’s 2018 list the list is the National Assembly for Wales. It was praised for continuing to be active in promoting LGBT rights by introducing a number of changes, such as offering an Mx title as opposed to the traditional Mr, Mrs or Ms. But where are the banks? With only five making the list, one has to wonder why banks are falling short in this area.

Lloyds Banking Group can take a round of applause for achieving fifth place. The banking

group has featured in the top 100 in previous years. Citi followed close behind Lloyds, placing at number eight. JP Morgan Chase & Co, Bank of America Merrill Lynch and RBS hold places 39, 56 and 83 respectively. Credit Suisse placed at 93.

For employees who do not feel confident enough to express their true identity, an unhealthy amount of time is spent hiding their sexual orientation. This does not just have a harmful effect on the employee, but also negatively impacts their work relationships.

LLOYDS BANKING GROUPLloyds has been recognised by Stonewall for its continuing efforts to stand beside the LGBT community at work. The banking

group boasts a range of inclusive policies including advertisements such as This is who I am. Lloyds’ Rainbow network plays a critical role in the bank’s approach to achieving a fully inclusive environment. By 2020, the banking group aims to increase the engagement scores of its LGBT colleagues to 70%.

Fiona Cannon, Lloyds Banking Group’s director of responsible business and inclusion, comments: “We are delighted to retain our position of Top Financial Services Employer for a fourth consecutive year, and remain a leading organisation in the Stonewall Top 100 employers list.

“We know how important it is for our colleagues and customers to feel included, and that the group is a place where everyone feels comfortable to be their true self.”

POSITIVE ROLE MODELSRole models in the workplace are consistently recognised for having a powerful influence within the LGBT community.

Proving this is Citi’s director and global head of operational regulatory change, Clare Eastburn. Citi achieved eighth place on the list, significantly improving its performance in previous years – up 23 places from 2017 and 92 places from 2016. Eastburn was named Bi Role Model of the Year by Stonewall, and is co-chair of Citi’s Pride network in London and the committee’s bisexual representative.

Bank of America took 56th place. Daniel South, head of diversity & inclusion EMEA (Europe, the Middle East & Africa), highlights BofA’s efforts: “Diversity & Inclusion (D&I) are embedded in everything we do. Specific goals and metrics are included in all business plans and reviewed with leaders throughout the year. Annually we conduct an Employee Satisfaction Survey which serves as a key measure for our leaders and HR teams.

“Building on our existing global Ally programme, and based on feedback from several Allies, in May 2016 we launched a new web-based Ally Engagement Portal where employees can learn about what it means to be an Ally or to be out at work, and how to move forward in the journey to become an LGBT advocate or champion.”

ROOM FOR IMPROVEMENTAccording to an employee feedback survey conducted by Stonewall, only 25% of lesbian, gay and bisexual respondents note that they would feel comfortable disclosing their sexual identity to everyone at work; 6% say they

Stonewall has released its top 100 employers for 2018, celebrating those who have made positive steps forward in creating a safe and open work environment for LGBT employees – but where are the banks? asks Briony Richter

stonewall top 100: where are the banks?

The 50 Santander Cycles featured rainbow colours

RBI 748 April 2018.indd 14 13/03/2018 13:49:01


analysis | stonewall 100


STONEWALL’S TOP 100 – 2018Rank employer Rank employer

1 National Assembly for Wales 51 Taylor Wessing2 Pinsent Masons LLP 52 Cardiff and Vale University Health3 Gentoo 53 Betsi Cadwaladr University Health4 Cheshire Fire and Rescue Service 54 Slaughter and May5 Lloyds Banking Group 55 GCHQ6 Baker McKenzie 56 Bank of America Merrill Lynch7 Berwin Leighton Paisner 57 Aberystwyth University8 Citi 58 Dentons9 Newcastle City Council 59 Tyne and Wear Fire and Rescue

10 Victim Support 60 University of Essex11 Clifford Chance 61 De Montfort University12 Welsh Government 62 University of Wolverhampton13 Ministry of Justice 63 Newham College of FE14 Cardiff University 64 Capgemini15 Crown Office and Procurator Fiscal 65 Northumbria Healthcare NHS16 Manchester Metropolitan University 66 Co-op

17 The University of Manchester 67 Tate

18 Environment Agency 68 Teesside University19 Norton Rose Fulbright 69 Northumbria Police20 Touchstone 70 PageGroup21 GSK 71 Barnardo's22 Nottinghamshire County Council 72 St Mungo's 23 House of Commons 73 Kirkland & Ellis24 The University of Sheffield 74 Lancashire Constabulary25 York St John University 75 Eversheds Sutherland26 CMS 76 Linklaters27 Travers Smith 77 Home Group28 Cheshire Constabulary 78 Department for Education 29 Sky 79 Leicestershire County Council30 Swansea University 80 Southend-on-Sea Borough Council31 Hogan Lovells 81 L&Q32 Royal Navy and Royal Marines 82 EY33 Herbert Smith Freehills 83 RBS34 PwC 84 The British Army35 KPMG 85 Cheshire West and Chester Council36 The Riverside Group 86 St Andrew's Healthcare37 Accenture 87 Macquarie Group38 Home Office 88 Golden Jubilee Foundation39 Nottinghamshire Police 89 Rhondda Cynon Taf Council40 JP Morgan 90 Police Scotland41 Bury Council 91 Allen & Overy 42 Leicestershire Police 92 Tower Hamlets Council43 Vodafone 93 Credit Suisse44 University of Leicester 94 Intellectual Property Office45 Wolverhampton Homes 95 Central and NW London NHS46 NE Ambulance Service NHS Fdn Trust 96 Virgin Money47 Your Homes Newcastle 97 University of Greenwich48 Sussex Police 98 UCL49 MI6 99 Aviva50 Leeds City Council 100 Fujitsu

Source: Stonewall

would not feel comfortable enough to tell anyone at work.

HSBC did not appear on the list, but a bank spokesperson says: “We believe that a diverse and inclusive workforce is critical to running a sustainable and successful business. We continue to make great strides in LGBT+ inclusion, building a connected and collaborative workforce that reflects the customers we serve and the communities in which we operate.”

Santander did not submit for this year’s Stonewall Top 100. However, Jessica Chu, head of diversity and inclusion, speaks about the bank’s commitment to the LGBT workforce: “We established Santander UK’s LGBT+ network, Embrace, in 2014; since then it has grown exponentially to around 2,000 members. Santander has strict policies around bullying and harassment that include sexual orientation and we have also launched our Gender Identity & Expression Policy, which includes a pioneering ‘transitioning at work’ guide.

“In 2017, Santander participated in seven national Pride festivals, and decorated branches in key locations with rainbow LGBT+ pride flags. We also supported Pride in London with the launch of 50 Santander Cycles with rainbow livery,” Chu adds.

LGBT employees constitute a sizable workforce population. To fully embrace a diverse workforce, banks and financial institutions must reflect on their responsibilities to all employees, regardless of sexual orientation and create a work environment where different voices are not just heard, but encouraged. <

twitter responses

RBI 748 April 2018.indd 15 13/03/2018 13:49:05


distribution | tangerine

Tangerine was originally owned by ING and operated under the ING Direct brand.

In 2012, ING Direct Canada was bought by Scotiabank for a reported C$3.1bn ($2.4bn), and renamed Tangerine in order to retain its characteristic orange. Tangerine is a standalone subsidiary of Scotiabank.

“We have really benefited from Scotiabank’s support and investment in us,” Mark Nicholson, Tangerine’s VP of client experience tells RBI. “Scotiabank has really fuelled our growth.”

DIRECT BANKSAlthough the Canadian banking market is dominated by branch-based banks and credit unions, direct banks and fintechs are an increasingly important part of the financial landscape.

ING Direct Canada and President’s Choice Financial, a supermarket banking joint venture between retailer Loblaws and CIBC, were the first direct banks in Canada. They were joined by Zag Bank, acquired by Desjardins to extend the Quebec-based cooperative financial institution’s reach across Canada; Alterna Bank, owned by credit union Alterna Savings; and EQ Bank, owned by Toronto-based lender Equitable Bank.

There are also fintechs such as Koho and Mogo which offer prepaid debit cards linked to mobile apps and personal financial management (PFM) tools, and robo-advisor providers such as Wealthsimple.

In August 2017, CIBC and Loblaws said they would dissolve their partnership and the

reportedly two million PC Financial banking customers would be transferred to CIBC’s new digital bank, Simplii Financial.

Loblaws retains sole ownership of its PC Financial Mastercard credit card customer base, with the credit card continuing to be tied to Loblaws’ loyalty programme, now renamed PC Optimum. In November 2017, the Canadian Press news agency reported that there were technical issues when Simplii Financial went live with the banking customer base transferred from PC Financial.

FULL-SERVICE MODELTangerine, which currently has over 2.1 million members and C$38bn in total assets, claims to be the only direct bank offering a full range of banking products. Customers can opt for Tangerine chequeing and instant access savings accounts, Tax Free Savings Accounts, debit/ATM cards, lines of credit, mortgages, fee-free cashback credit cards, Registered Retirement Savings Plans, and index-based mutual funds.

“Because we are a full-service bank, we find an increasing number of members use us as their primary bank,” Nicholson says.

Initially, before Tangerine introduced chequeing accounts, customers used it as a home for their savings and did their day-to-day banking with another institution. However, Christie Christelis, president of Canadian consultancy Technology Strategies International (TSI), says consumers are still likely to remain with a bricks-and-mortar financial institution. “For the vast majority of Canadians, their first choice for a primary

bank would be one of the big five,” he says.“Typically, 75% of respondents to TSI’s

survey say that one of the Big Five Canadian banks is their primary bank. If we extend that to other well-known banks and credit unions such as National Bank of Canada, Desjardins, Vancity, Laurentian Bank and HSBC Canada, that percentage goes up to 85%.

“There may be a small cadre of consumers to whom a digital-only bank may appeal as a primary bank. Otherwise a digital-only bank’s role is as a secondary bank – possibly one that offers the best rates on savings accounts, or has the best brand image.”

DIGITAL ONBOARDINGTangerine has upgraded its client enrolment process to make digital onboarding easier.

Under Canada’s banking regulations, FIs are no longer required to obtain paper signatures from new account applicants, Nicholson says.

“A customer can complete the Tangerine account-opening process in a few minutes and be up and running with some products,” he adds. “We do a credit check on them to verify the ID details they supply such as their address and date of birth, and then ask them some random questions from their credit file.”

“Most banks require you to apply for one or more products before you can become a client,” says Nicholson. “Our model is similar to that of the retail industry. You first of all become a member of Tangerine and then you decide which of our products to put into your Tangerine ‘shopping basket’. Over 25% of new clients start with more than one product during enrolment as a result of our new

tangerine: A makeover for the customer experienceTangerine, Scotiabank’s Canadian digital-only bank, has substantially enhanced its digital customer experience. Mark Nicholson, Tangerine’s VP of client experience, says the redesigned website introduced last September was the most fundamental change since the bank’s launch in 1997. Robin Arnfield reports

RBI 748 April 2018.indd 16 13/03/2018 13:49:07


distribution | tangerine

onboarding process, instead of just taking out one product.”

So far this year, Tangerine has seen a 32% increase in customers compared to the same period in 2017. “People are attracted by our lack of fees and higher savings interest rates and lower borrowing rates,” says Nicholson. “They then stay because they like the customer experience.”

Nicholson says 99% of Tangerine transactions are digital, and there is a heavy predominance of mobile users. However, clients in a number of big cities have the option of face-to-face banking.

Tangerine operates Tangerine Cafés, pop-up locations and permanently sited kiosks in Canada where clients can sign up for an account and engage a Tangerine associate.

WEBSITE UPGRADENew features offered on Tangerine’s website include spending categorisation with colourful visuals to make it easier for clients to see where their money is being spent – for example, on shopping, housing or transit. The Transactions section also includes transaction details for all the client’s Tangerine accounts in a single location for greater convenience.

“We’re the only Canadian bank to offer PFM from within the native banking app,” says Nicholson. “Other banks may offer access to third-party PFM capabilities.” TD, for example, offers TD MySpend based on software provided by US-based Moven.

“We also offer authenticated chat with our agents which is fully integrated within a transaction,” Nicholson adds. “This means

that, when you chat with an agent, they know where you are in the transaction process.”

The new Bills section lets clients see their bill payment history and how their bills have trended over time. Quick actions such as moving money from one Tangerine account to another, or performing email money transfers, are now listed at the top of the page. When a client logs into the Tangerine site, insights appear at the top of their screen, including actionable notifications, hints, alerts and other helpful information about their account.

During the first quarter of 2018, Tangerine plans to roll out all these enhancements to its mobile banking app.

“The new customer experience involved a total code rewrite and was created simultaneously for desktop and mobile banking users,” Nicholson explains. “But we implemented the desktop version first.”

In April 2018, Tangerine will launch a beta pilot of new features designed to help

customers make smarter decisions on how they spend their money and achieve their financial goals, Nicholson adds.

MOBILE INNOVATION“Tangerine has a long history of creating simple and convenient banking experiences for our clients, and continuous innovation is a big part of how we do this,” says Nicholson.

“Our mobile banking app enables clients to log in leveraging biometric capabilities like face recognition and Touch ID or by scanning their eyes with Eyeprint ID. We also enable clients to authenticate themselves with their voice through our VocalPassword solution.”

Forrester Research’s 2017 Canadian Mobile Banking Benchmark report by Peter Wannemacher and August du Pont says: “Digital teams at most of the Canadian banks we evaluated have steadily improved the design and features of mobile banking, making apps and mobile sites easier to use, adding transactional features, and building better marketing and sales tools. But digital banking teams need to keep raising the bar to engage customers and differentiate their brands.

“Established competitors such as Tangerine, and disruptors such as Koho and Mogo are competing for customers by promising better experiences,” the report adds.

In July 2017, Tangerine announced that, for the sixth consecutive year, it had earned the highest ranking in terms of customer satisfaction among mid-sized banks in the 2017 JD Power Canadian Retail Banking Customer Satisfaction Study. <

an increasing number of members

use us as their primary bank

Mark Nicholson, Tangerine

RBI 748 April 2018.indd 17 13/03/2018 13:49:23


industry insight | avaloq

Will loyalty, brand and incentivisation play a (more) fundamental role in retaining

clients and attracting new ones? Will cost become even more important in driving client flows?

Will tech-savvy Google Bank Plc and Amazon Insurance Inc. dominate? Or will the sheer size and buying power of incumbent banks and other financial institutions mean they will still win out?

The implementation of the second Payment Services Directive (PSD2) across the EU and the rollout of the Open Banking programme in the UK – both in January – are the seeds of this future.

PSD2 lets regulated third-party providers access a client’s bank account information and/or request payments. It aims to attract new providers and technology companies and create more innovative services for clients. Likewise, Open Banking will allow clients to give companies other than their bank or building society permission to securely access their accounts.

In the UK, Open Banking will be extended to cover all products with payments capability such as credit cards and e-wallets throughout the course of 2018 and 2019, in alignment with PSD2.

The concept of Open Banking comes into play at a challenging time for existing banks, which in many cases are facing reduced revenues since the financial crisis as well as increased pressure from regulators, which is generating more costs, for example in

compliance. New entrants such as digital and mobile-only banks do not face legacy costs and infrastructure hurdles, giving them strong advantages that more established players do not have.

How should, therefore, institutions navigate through this new era of PSD2 and sector

openness? The temptation for many might be to deliver a minimal

solution – one that meets the regulatory criteria but nothing more. In our view, this would be a mistake: banks will be at risk of savvier entrants, including fintech

firms and startups, without getting any of the benefits themselves.

In contrast, generating ‘data gravity’ should be a priority.

The key will be to motivate partners and third-party providers – what we term as the ‘ecosystem’ – to use client data but without the seed organisation giving up the data ownership. Banks should not only offer application programming interfaces (APIs) so that third parties may retrieve client data but they should also offer new, non-UX services to foster ‘stickiness’ and retain and grow their customer bases.

This will entail becoming much smarter with data, bringing into play lifestyle considerations and developing new consumer ecosystems that will integrate banking services seamlessly in a secure, safe and trusted environment. Indeed, while exposing APIs to third parties will accelerate the commoditisation of the banking front end, accessing such data should also allow a number of new use cases:

• Competition for loans and credit products will be fairer, where competing banks will access the same information to determine the risk. Anything that helps to streamline the decision process – such as customers’ banking data – will be key to improving profitability;

• By capturing a holistic view of client’s wealth, institutions will be able to propose more informed choices, reinforcing their ownership of the client relationship, and

• Institutions will be able to propose new services based on banking data analysis such as developing bespoke reward programmes.

The UK is, actually, leading the charge on this new era of ‘data liquidity’. Under the Competition and Markets Authority mandate, the UK is fully specifying an interface which will guarantee interoperability between different institutions. The EU regulator has only specified certain mandatory services to be provided, letting each bank decide the implementation details.

While interoperability in the EU will be costlier than in the UK, perhaps giving an advantage to incumbent players in the short term, there is still a profound need to optimise systems and processes for what is expected to be a defining period in Europe’s financial services market.

We believe the institutions taking first and full advantage of the new opportunities will gain a competitive advantage in this environment. Indeed, Avaloq is already preparing a fully fledged API covering the entire banking scope to support banks and wealth managers for this next step. <

developing ecosystems in the era of data liquidityImagine a market of pure customer data liquidity, where financial institutions and tech firms can access, exchange and use authorised consumer data seamlessly. Who will be the winners and losers in this scenario? asks Avaloq’s Jiten Varu

RBI 748 April 2018.indd 18 13/03/2018 13:49:27


With many struggling to get the right procedures in place to just be compliant with PSD2,

it is clear that banks still need to tackle the practical aspects that need to be considered as they prepare to grasp the opportunities that will be presented to them in an Open Banking environment.

There are many steps that retail banks must prioritise in order to really make Open Banking a reality for both them and their customers.

WHAT IT MEANS It sounds so simple, but as a term that has been bandied about for so long, Open Banking no longer has a clear definition.

Firms need to ensure that they gain the right level of knowledge and insight as to what Open Banking could encompass, alongside thorough market research and customer insight, so they can create a definition that works both for them and their users. Again, considering this is such a new term, there is not yet a huge amount of historical knowledge for companies to make the concept easier to adopt.

One place where we can look is the European banking market: BBVA and Fidor are two banks that have been leading the charge in developing new banking processes, and innovations such as the BBVA API Market and Fidor’s Open Banking app are

becoming lighthouse projects for other banks looking to innovate their existing processes.

Once banks have an idea of what they want to be able to provide to their customers,

they need to then make sure they have the ability to make that

happen. Open Banking requires agility, speed and bank-wide co-operation.

In light of this, firms need to embrace more of an entrepreneurial spirit

than ever before, addressing the key pillars of culture,

technology and monetisation.

THE RIGHT CULTUREThe crux of it is that Open Banking is a whole new concept. In order for it to work, it requires a whole new way of thinking.

Organisations will need to be both technologically and business-enabled, and in order to achieve this, teams will need to become hybrids; they need to be more agile, and better equipped with a mix of skills and people. This approach is a complete challenge to traditional financial services methodology – cutting across siloed structures and allowing banks to prioritise improvements like never before.

Technology is absolutely vital for any Open Banking strategy. Financial organisations need to ensure that they are fostering a working culture that will mean developers actively want to work with them, otherwise they will lose out to the fintechs and challenger banks.

For many organisations, thinking of ways to

attract the right talent may well be low down their list of priorities, but this approach needs to be radically changed if banks are to make a success of Open Banking.

MONETISATIONFinally, organisations need to have a clear plan of how they want to measure Open Banking.

The processes that are required for banks to become more agile may well end up making an institution more cost-effective – a key example being cloud storage.

Similarly, once banks have open APIs in place effectively, they could well be able to drive additional sources of revenue from this valuable data.

Banks need to decide what they most want to measure when it comes to Open Banking, and make sure they have the processes in place to support this.

REVOLUTION OF THE FUTURE The reality is that Open Banking is more than just a new department pursuing a new opportunity. This topic is more wide-ranging; it is technical, it is infrastructural, it is about agility.

Open Banking is about creating value in ways that banks have never previously considered. Those firms which fail to embrace the opportunity risk being left behind – not only by their traditional competitors, but also the innovative tech firms who are happy to provide ‘financial looking’ services that were once the sole domain of the bank. <

industry insight | gft

open banking: making a revolution become the realityIt has been almost two months since the implementation of PSD2, and the Open Banking revolution in mainstream banking is yet to be seen. Christian Ball, head of retail banking at GFT, looks at what banks need to do to deliver the benefits to their customers – and themselves

RBI 748 April 2018.indd 19 13/03/2018 13:49:29

News | digest

april newsDigital-only Liv. introduces two features to mobile appLiv., the digital-only bank of Emirates NBD, has introduced two new features, BillSplit and My Tag, to its mobile banking app.

The millennial-focused lender said the BillSplit feature will enable users to quickly divide bill payments with friends and family, while the My Tag budgeting feature will ena-ble users to tag expenses based on personalised categories.

The BillSplit feature will enable customers to pay for a bill on a Liv. debit card and send money request notifications through social channels to friends and family.

Emirates NBD’s senior executive VP, and head of retail banking and wealth man-agement, Suvo Sarkar said: “Bill Split is a much-needed tool in today’s social environ-

ment in which a new generation of consumers rarely carry the correct change or physical cash to pay one another.

“The feature saves them the hassle of split-ting the bill via individual card transactions and bank transfers, and instantly allows them to pay back their friend or family from their smartphone.”

My Tag is an expense-management feature intended for budget-conscious consumers. The tool allows users to understand where they spend most of their money, with users able to customise expenditure tags to monitor spending on specific items.

Liv., which was launched in early 2017, has been building a portfolio of services developed specifically for millennial customers. <


UK orders independent PRA probe into Co-operative Bank oversightHM Treasury, the UK government’s economic and finance ministry, has ordered the Prudential Regulation Authority (PRA) to investigate its oversight of Co-operative Bank between 2008 and 2013, during which period the bank neared the brink of complete collapse.

The independent probe will consider nine key aspects, including “assessing the actions, policies and approach of the FSA and the PRA as the institutions with statutory responsibility for the prudential supervision of the Co-op Bank” during the period 2008-2013. The investigation will also focus on how the troubled lender failed in its bid to acquire 632 Lloyds Banking Group branches in 2013.

Economic Secretary to the Treasury John Glen said: “We are committed to creating a stronger and safer banking system. A vital part of this is ensuring that our regulatory system can learn from past events. The launch of this independent review is a further demonstration of this commitment.”

Treasury Committee chair Nicky Morgan said: “The launch of the independent

inquiry into Co-op Bank – more than four years after it was announced – is welcome; but it is hugely overdue. Whether or not my letter to the FCA was a prompt to action, the review must now be completed in good time.

Morgan continued: “Although much has changed since the events in question, a forensic examination of the circumstances of Co-op Bank’s failure will no doubt yield important lessons for the financial regulators.

“The Committee will want full transparency on the findings of the investigation, and I will be writing to Mark Zelmer setting out our expectations.”

The latest move by HM Treasury comes after the FCA announced that it has now completed its enforcement investigations into the Co-op Bank and related individuals.

The PRA has tasked Mark Zelmer with carrying out the independent review, which has been approved by Glen. Zelmer has over 30 years of experience in financial services regulation and policy. <

RBI penalises Axis Bank and Indian Overseas Bank

The Reserve Bank of India (RBI) has penalised Axis Bank and Indian Overseas Bank for non-compliance with a number of its directives.

Axis Bank was fined INR30m ($461,100) for non-compliance with the directions issued on Income Recognition and Asset Classification norms, while Indian Overseas Bank was penalised INR20m ($307,400) for not complying with Know Your Customer (KYC) requirements.

In 2016, during a statutory inspection of the Axis Bank, violations of various regulations were detected in the assessment of non-performing assets.

RBI issued a Show Cause notice to the bank based on the inspection report and other relevant documents in November last year. The central bank determined the penalty amount after considering Axis Bank’s reply and oral submissions made during its personal hearing.

Indian Overseas Bank was penalised after detecting fraud in one of its branches. Examination of documents and an internal inspection report revealed non-compliance with RBI’s KYC directives.

Following the bank’s reply to the Show Cause notice, as well as oral and written submissions in the personal hearing, RBI concluded that the charges of non-compliance were substantiated and handed the bank a monetary penalty. <

RBI 748 April 2018.indd 20 13/03/2018 13:49:39

News | digest


India forms panel to address fintech issuesThe Indian Ministry of Finance has set up a steering committee that will consider various issues pertaining to the country’s growing fintech sector.

The new committee will aim to make all fintech-related regulations flexible, and pro-mote financial inclusion among micro, small and medium-sized enterprises (MSMEs).

The committee will also aim to generate improved entrepreneurship in “sectors where India holds distinctive comparative strengths compared to other emerging economies”.

The committee will consist of eight mem-bers, and will be headed by the secretary of the Department of Economic Affairs. It will also be able to invite relavant participants from the private sector.

The panel will include a deputy governor of the Reserve Bank of India, and the Unique Identification Authority of India’s CEO as members.

The committee will be responsible for assessing developments in the fintech sector, both globally and in India, and devise a common shared understanding of the sector’s current status. It will also analyse how fintech can be utilised in critical sectors of the economy including the financing of MSMEs, affordable housing, access to and adoption of digital payments, and providing e-services to vulnerable sections of society.

As well as promoting ease of doing business, the new panel will assess the scope of co-op-eration in fintech with other countries such as Singapore, the UK and China.

It will also develop regulatory interventions such as a regulatory sandbox model to facili-tate the role of fintech in key sectors.

The committee’s terms of reference enable the fintech panel to work with government agencies to create and use unique enterprise identification numbers. <

Skyline National Bank to acquire Great State Bank

Parkway Acquisition, the parent company of Skyline National Bank, has signed a definitive agreement to acquire Great State Bank in a stock transaction worth around $14.5m.

Great State Bank will merge with and into Skyline National Bank. On completion of the integration, Skyline will continue to operate as a wholly owned subsidiary of Parkway. The united business will manage 20 bank branches, and will own assets of approxi-mately $700m, deposits of over $600m and shareholders’ equity of over $70m.

Skyline and Parkway president and CEO Al-lan Funk said: “This combination will expand our presence into several additional North Carolina counties and further our goal of being the leading community bank in our region.

“This transaction is a partnership of two organisations that share a similar culture of service and community, and represents a natural extension of Skyline into the adjacent markets of Wilkes, Watauga and Yadkin coun-ties in North Carolina.

Funk added: “We look forward to serving the local businesses and individuals in these areas and continuing to offer an unmatched customer experience in our existing markets.”

For each share of Great State common stock, its shareholders will receive 1.21 shares of Parkway common stock.

The transaction, which has been unani-mously approved by the boards of directors of both companies, is expected to be immediate-ly accretive to Parkway’s estimated earnings before one-time costs, with a tangible book value earn-back of around three years.

On completion of deal, two Great State directors will join the Parkway and Skyline board of directors. Great State president and CEO Greg Edwards will continue as regional president for North Carolina.

Subject to approval by Parkway and Great State’s shareholders, banking regulators and other customary closing conditions, the merger is scheduled to conclude in the third quarter of 2018. <

brazil’s Nubank raises $50m in financing roundBrazil-based financial startup Nubank has raised $150m in a new financing round as part of a strategy to boost growth.

The latest financing round was led by venture capital business DST Global Investment Partners, with other current investors including Founders Fund, Redpoint Ventures, Ribbit Capital LP and QED. Two new businesses also joined Nubank’s sixth financing round: Dragoneer Investment Group and Thrive Capital Partners.

Nubank has raised approximately $330m since its inception in 2013, and the São Paulo-based startup secured required regulatory approval to become a bank in January. Nubank founder David Vélez said the startup will invest the proceeds to continue its growth.

One of the bank’s primary strategies is to target Brazil’s large unbanked population; around 60 million Brazilians do not currently have a bank account.

In October 2017, Nubank announced plans to offer digital accounts to enable users to make transfers, pay bills and earn more interest than through average savings accounts. <

RBI 748 April 2018.indd 21 13/03/2018 13:49:51


News | digest

New Zealand’s ASB to introduce AI-based digital assistantNew Zealand-headquartered ASB Bank is set to introduce a new artificial intelligence (AI)-based digital assistant, Josie.

Developed in partnership with technology business FaceMe, the new human-like inter-face aims to assist New Zealand SME owners looking setting up businesses. The bank plans to introduce the platform later this year, once a period of testing, described as an “appren-ticeship”, has been completed.

ASB Retail Banking executive general manager Russell Jones stated that Josie has been created to facilitate its business in New Zealand. He said: “We’re excited to develop this technology, but more importantly we’re eager to see what Josie will help our customers achieve.

“Globally, New Zealanders are known for innovation and entrepreneurship: we have brilliant ideas but sometimes lack the knowl-edge for profitable execution. This is where Josie will help.”

In the apprenticeship, SME business owners who are not ASB customers can interact with Josie to strengthen its understanding of various customer requirements, and enable it to provide customised assistance.

FaceMe CEO and founder Danny Tomsett commented: “Much like the human mind, Jo-sie’s knowledge will develop with information through human interactions over time.

Tomsett continued: “As AI is still develop-ing there are some misconceptions surround-ing its impact on people. One of the biggest misconceptions about AI is that it is designed to replace humans.

“Great AI should be designed to enhance what humans do and how they operate. ASB understands this, and they’re leveraging the technology as a tool to empower their staff and create great outcomes for SME owners.”

ASB has already introduced Plus for ASB, a free application that provides information to SME businesses. <

Mexican Congress approves new financial technology billMexico’s lower house of Congress has passed a new bill to regulate the financial technology sector, setting out definite rules for crowdfunding and cryptocurrency firms.

The bill was approved by the upper chamber Senate in December 2017, and will be enacted into a law following the signature of Mexican President Enrique Pena Nieto.

The bill has been formulated to ensure financial stability, prevent money laundering, and encourage the rapidly

growing financial technology sector.It is expected to bring areas such as

crowdfunding, payment methods, and rules surrounding cryptocurrencies including Bitcoin under a regulatory framework.

It also aims to encourage Open Banking, which allows financial firms to share user information through public application programming interfaces, thereby facilitating competition in the industry.

It enables small and medium-sized banks to use information from the customers

of larger banks, subject to user approval. Open banking is also expected to boost inclusion, reduce associated costs and improve services.

Once the bill becomes a law, regulators will start devising secondary laws related to the sector, setting out specific details.

The new law sets out general terms pertaining to the sector, with key details to be formulated by the Mexican central bank, the finance ministry, and its banking and securities regulator. <

Current gains investment from Fifth ThirdNew York based startup Current has announced that Fifth Third Capital joined the recently announced Series A funding led by QED Investors.

Current’s platform aims to enable teenagers to connect money with “the brands, experiences and people they value”. Through a mobile app linked to a debit card, Current users can build on their digital and financial identities.

Current founder and CEO Stuart Sopp stated: “We believe the currency of the future will be digital and social, and Gen-Z is proving to be the most socially responsible and financially savvy generation of teenagers.

“It seems silly to ask them to follow the same, largely paper-based financial journey as their parents when they have immediate access to more tools and information than any generation before them.

Sopp continued: “This strategic investment from Fifth Third validates our mission to give teenagers the freedom and flexibility to make the best financial decisions for them with the support of their friends and family.”

There are around 30 million teenagers in the US, and Current believes the demographic’s approach to money differs from those of previous generations, and needs appropriate support tools.

Vanessa Indriolo Vreeland, head of acquisitions and strategic investments at Fifth Third Capital, commented: “Current’s approach addresses an unmet need, as the digitisation of payments becomes increasingly popular with this young demographic.

“Fifth Third has a commitment to educating kids from an early age about how to manage their finances. Current helps guide parents as they teach their teens how to spend, save and give, all within a well-designed platform.

Vreeland added: “It is a natural fit for us to invest in this young and promising company.” <

RBI 748 April 2018.indd 22 13/03/2018 13:50:03


News | digest

Carney calls for cryptocurrency regulationBank of England governor Mark Carney has said that cryptocurrencies are failing as a form of money.

“The time has come to hold the crypto-asset ecosystem to the same standards as the rest of the financial system,” Carney, who leads the Financial Stability Board, said in a speech to the inaugural Scottish Economics Conference.

Carney did not call for cryptocurrencies such as Bitcoin to be banned, but believes reg-ulation would be a more strategic approach. This contrasts with other countries, such as Indonesia and Bangladesh, which have banned Bitcoin for payments.

Some UK banks have taken independent action against cryptocurrency use. Lloyds Banking Group banned customers from purchasing Bitcoin and other digital curren-cies using its credit cards in February. Virgin Money followed, banning several digital currencies from being purchased on its credit cards. Both Lloyds and Virgin raised concerns about customers building up large levels of debt while cryptocurrency values rise and fall unpredictably.

Carney stated that, at least for the time being, cryptocurrencies do not pose a risk to the UK’s financial stability, but they do for individual investors. He added: “Cryptocur-rencies are proving poor short-term stores

of value. Over the past five years, the daily standard deviation of Bitcoin was 10 times that of sterling.

“Consider that if you had taken out a £1,000 ($1,390) student loan in Bitcoin in last December to pay your sterling living costs for next year, you would be short about £500 right now. If you had done the same last September, you would be ahead by £2,000. That is quite a lottery. And Bitcoin is one of the more stable cryptocurrencies – indeed, the average volatility of the top 10 cryptocurren-

cies by market capitalisation was more than 25 times that of the US equities market in 2017.”

Digital currencies are often used anon-ymously in transactions including money laundering, drug trafficking and tax evasion.

“Bringing crypto-assets onto a level regu-latory playing field could also catalyse private innovation to create a more resilient, effective payments system,” Carney concluded.

“With these foundations in place, the scene is set for better payments, a better economy and a better Friday night out.” <

HSBC allows banking in 10 currencies

HSBC has launched an account in Australia that allows customers to save, spend and transfer money in 10 currencies, without any charges either overseas or at home.

Holders of the new HSBC Everyday Global account are not required to make minimum monthly deposits or transactions. They can bank in 10 different currencies: Australian, US, Canadian, Singapore, Hong Kong and New Zealand dollars, and well as sterling, euros, yen and yuan.

The account’s Visa debit card automatically selects the currency to use at the point of sale. The account also supports online and offline shopping.

HSBC Australia’s head of retail banking and wealth management, Graham Heunis, said: “We know that Aussies love to travel and shop like a local, so why not pay like a local? We don’t want customers to have to pay more to shop on overseas sites, or to get cash out at the airport for a taxi or for a meal when they’re on holiday.

“Seventy-five percent of us are choosing to pay in Australian dollars overseas to avoid fees and the inevitable ‘statement surprise’. This often means getting a poor exchange rate, which can be the biggest hidden cost of all.”

The new account was developed after research carried out by HSBC Australia showed that almost half (49%) of Australians were charged an overseas transaction fee in the last year. <

Mark Carney, Bank of England

Virgin Money plans digital bank launchVirgin Money is planning to beta-test its digital bank in the second half of this year, with a possible launch in 2019.

In the past year, Virgin Money has spent £38.3m ($53.2m) to develop technology to support its new digital challenger bank. It aims to expand in the SME market and extend its offerings into current and savings accounts through the project.

In a statement, Virgin Money said: “The Virgin Money digital bank will be underpinned by next-generation technology and architecture, offering customers a universal account that can be personalised to create a unique proposition tailored to individual needs.”

Virgin Money has also released its annual results for 2017, reporting an underlying profit before tax of £273.3m, an increase of 28.1% compared to £213.3m in 2016. Total income also rose by 13% from £586.9m to £666m. <

RBI 748 April 2018.indd 23 13/03/2018 13:50:07


industry insight | dealflo

If customers can choose to access their bank accounts via any Third-Party Provider (TPP) - Amazon, Apple, or

Facebook for example – rather than direct, banks could end up as factories for financial products.

In the worst-case scenario for the banks, TPPs could own the entire relationship with the end customer. Adding insult to injury, the bank would still own the risk of the product.

Losing control of the direct relationship with the customer could impact the bank hugely – from losing brand trust, to losing the ability to leverage relationships to drive profit.

Customers, on the other hand, will be able to choose between keeping their relationship with a bank despite the comparatively poor customer experience, or interacting with a TPP, which offers a better customer experience but with arguably higher security risk.

With fintech adoption rates on the rise, it is not hard to predict which route most Generation Z, millennial and Generation X customers will choose.

Of course, some legacy customers will never switch banks, but over time significant numbers will seek change. In 2016, an EY study found that 40% of customers expressed “both decreased dependence on their bank and increased excitement about what alternative companies can provide”.

EY’s 2017 Fintech Adoption Index predicted that the generation of people aged 18-24, and those younger, “will mature without developing the strong relationships with incumbent financial services providers that are characteristic of current older generations.”

The question is not whether customers will start to move away from traditional banks in

the future, but how banks will address this new challenge.

INNOVATION AND CONTROLThe answer for banks lies in innovation and control. Banks not only need to take control of onboarding processes, but also innovate on customer experience.

While all banks will step up their technology and security in the wake of Open Banking, we will see the emergence of three types of response:

1. Willing factory banksThese banks will step up security and compliance, but not the customer experience. They will accept a loss of control but will insist on compliant on-boarding standards to reduce risk for the bank.

2. Super-provider banksA few extraordinary banks will invest heavily in the customer experience and take the time to invest in market-changing value propositions.

Rather than focusing on financial products, they will think more in terms of innovations to help customers achieve goals, such as ‘long-time savings’.

The product will be the way to help them meet those goals – whether a financial or technological product, or both.

3. Unwilling factory banksThese banks will lose control of the customer relationship, but will not insist on onboarding standards with TPPs, and therefore they will carry unnecessary operational risk.

ONBOARDING IS CRITICALIn the new world where every customer touch counts, the initial experience – the onboarding process – is critical not just for customer experience, but also for managing risk.

We believe there should be a set of approved standards, set by banks, to control how new customers are brought on board – whether that is by a bank or by a TPP – in the future. This would ensure the application of consistent best practice in key areas such as digital identity verification, anti-impersonation, AML, fraud checks, bank account and document verification, affordability, and electronic signature.

All these factors will combine to help manage the banks’ onboarding risk – whether handled directly or through a TPP.

RADICAL CHANGE At the same time as taking control of onboarding standards to mitigate risk, traditional banks need to embrace radical change and improve their digital offering. In this new world, everything is up for reinvention.

Traditional banks need to become more digital and responsive to their customers’ demands. Often that entails the simplification and rationalisation of a current messy offering which has grown incrementally over a period of many years.

They need to deliver a great customer experience across the board, and place customer convenience at the heart of everything they do.

Some will achieve this. Despite the bad press they have received in the past, banks have some brilliant people working for them – people who are innovative and visionary and could conceivably imagine how to compete with Amazon on customer experience.

The big question is whether these people hold the influence or the budget within the banks to effect complex cultural change. Banks will need to embrace the inventors and the mavericks within, to help them reshape and prepare for a future that is radically different.

Those that are unable to change and manage the change around them face a slow death at the hands of unplanned disintermediation and uncontrolled risk.

So, if you are a bank, it is time to decide: what kind of bank are you going to be? The only thing that is certain is that it is probably not the kind you are today. <

customer experience: can you compete with amazon?That is the real question banks should be asking with the introduction of Open Banking. The big issue is not security – banks are used to these issues – it is banks’ disintermediation from customers, writes Dealflo CEO Abe Smith

RBI 748 April 2018.indd 24 13/03/2018 13:50:09


analysis | banking data

A research paper by Cornerstone Advisors, commissioned by analytics firm Cubeiq, looks at

how banks are not using key pieces of information that could help them improve marketing and customer loyalty.

Areas such as where else customers bank, what they spend their money on, or how long their commute to work takes are all valuable pieces of information, and banks are missing out on it.

LEVERAGING DATAIt is clear that banks do not make the most of the data they have. The report found that while 14% of banks say they use data to deliver targeted communications, nearly a third struggle to do so.

Only 6% of banks think they excel at analysing customer journeys, while three in ten are just beginning to experiment in this area. By designing personalised product offerings, banks can potentially create more meaningful customer relationships. The data

can be used to identify customer trends and, if harnessed correctly, will significantly improve marketing results.

Mobile location data is not just about pinpointing where a customer is; it reflects how frequently consumers visit a given location, how long they stay there, what they

purchase and where they go next. The report noted that banks and financial institutions rarely issue all the credit cards their customers have. Therefore, many do not have accurate data on where the customer’s money is going. Many customers receive better offers from other banks, despite being long-term customers to one.

COMPETITIVE INTELLIGENCECustomer segmentation enables banks to better target their customer base with relatable marketing campaigns tailored to their requirements.

The report found that 55% of Bank of America (BofA) customers visited JP Morgan Chase branches in March 2017, with fewer visiting in April and August. Furthermore, the number of BofA customers that visited PNC consistently increased throughout the year. This could be because Chase and PNC were offering better deals to consumers, making them less willing to go to BofA for those particular products or services.

DIGITAL SPENDINGAlthough banks and other financial institutions can fall short in terms of efficient use of data, they do see the importance of digital channels to improving marketing success. According to the report, in 2016 financial institutions spent over $8bn on digital advertising. This figure is expected to increase by 50%, a CAGR of 11.2%, to more than $12bn in 2020. Some 62% of the money spent in 2016 was allocated to the mobile channel.

Despite this, many marketers are not investing enough into mobile-related consumer data. The report noted that spending on customer data – which accounts for just 2% of a typical bank’s marketing budget – increased by 5% between 2014 and 2015, far below the 19% rise in digital advertising over the same period.

Overall, the report found that banks are not taking advantage of all the available consumer data they have through mobile channels. This risks leaving customers to go elsewhere to find a bank that can provide services that cater to their specific needs.

To survive in an ever-increasing digital world, it is vastly important that banks and financial institutions harness the data they have available. Not only will it strengthen their existing customer base, but it will attract new customers as well. <

banking data: embracing the valueData analytics has made monitoring customer demands and trends significantly easier; however, many banks are failing to fully utilise the information in their own databases. Briony Richter looks at new research by Cornerstone Advisors

LEVERAGING CUSTOMER DATA

Use of customer data Excel at it Struggle with it Experimenting

Segment audience 25% 28% 29%

Understand customer behaviour 24% 30% 32%

Optimise and allocate marketing budget 22% 35% 27%

Deliver personalised communications 14% 32% 39%

Marketing automation 9% 26% 28%

Map and analyse customer journey 6% 25% 31%

Performance lookalike modelling 6% 20% 21%

Predict future needs and behaviour 5% 29% 23%Source: Cornerstone Advisors

0

3

6

9

12

15

20142015

2017e2018e

2016

$bn

2020e2019e

digital spending

Source: Cornerstone Advisors

Spending on digital advertising by US financial institutions

RBI 748 April 2018.indd 25 13/03/2018 13:50:10


industry insight | Pillsbury

For the modern consumer, technology is a moving feast: each upgraded iPhone, tablet or laptop is quickly

replaced by the latest model that is able to do so much more.

In this digital jungle it is survival of the fittest; companies like Google and Amazon are constantly having to adapt to meet the demands of a new generation of consumer that is used to getting more and more from fewer and fewer vendors.

And so it is that Amazon, having already expanded into groceries and entertainment, is now also taking steps into the world of finance, advancing loans in excess of $3bn to small businesses in the UK, US and Japan since Amazon Lending was launched in 2011.

Amazon is not the only retailer to turn its hand to lending, however. John Lewis, a household name for homeware and Christmas presents, has joined the online giant. Growing rapidly from its beginnings in 1864, it is not entirely surprising that John Lewis is also taking steps into financial services, launching a personal loan service in January 2018, offering between £1,000 ($1,390) and £25,000.

This launch only adds to John Lewis’s financial services range, with the retailer also providing insurance, currency exchange and international payment services. In its attempts to remain competitive, it also offers no hidden, administration, or early repayment fees. As companies – tech or retail – jostle for market share, should we not ask a key question: is banks’ hegemony under threat?

Given that recent studies have shown that 30% of consumers would be prepared to bank with the likes of Facebook and Google if they offered such services, this is a serious question. After all, the current generation of young adults grew up in the shadow of the financial

crash and may not have totally recovered confidence in established financial institutions.

Clearly there is a challenge to traditional institutions, and so banks have reacted, investing heavily in fintech so as not to be left behind. Lloyds has recently rolled out defences against this wave of competition, armed with a £3bn investment in a new digital strategy.

Important though it is for banks to innovate, they can breathe easy for now: JPMorgan Chase’s figures, for instance, are still streaks ahead of Amazon Lending, with a staggering $130bn provided to small banks in that same period.

SCRUTINY AND REGULATIONCultural and regulatory barriers define the financial world, and its rules and regulations – a prohibitive product of banks and their regulators over decades – are proving, for now, to be blockades to these challengers.

The likes of John Lewis and Amazon are not subject to anywhere near the same levels

of scrutiny and regulation. They have no demands on the nature and adequacy of their assets. The appropriateness and qualifications of their executive is, other than perhaps those imposed on public companies, limited to the pressures of their investors. Expecting them to seriously navigate such a complex landscape is perhaps somewhat optimistic.

Ultimately, banking is an aged profession and, in comparison, youthful tech companies lack both the experience and expertise to overcome these hurdles any time soon, despite commendable levels of enthusiasm. However, recent events may indicate change on the horizon. For example, the US Office of the Comptroller of the Currency is exploring a form of Special Purpose National Bank Charter for fintechs. Additionally, Brian Knight, director of the program on financial regulation, has advocated a form of non-depositary charter and a “sandbox” scheme similar to that operated by the FCA.

In light of this, there is certainly a movement that argues the consumer and financial landscapes do not need to be parallel concepts, as a blurring of the two would likely serve the interests of the consumer.

All of this said, technology and consumer-driven companies are already rolling out financial services, with significant uptake. With the appropriate oversight and regulation, it is not unreasonable to consider that this may only continue. After all, Disraeli could not have imagined the economic, social and political developments that would follow his words – from world war to the World Wide Web.

So, while it remains to be seen whether these challengers can effectively master the regulatory art of banking and truly threaten the big UK banking players, we should not totally rule it out. <

inevitable and constant: is the hegemony of the banks under threat?Benjamin Disraeli was probably not referring to regular developments in iPhone technology when he declared: ‘Change is inevitable, change is constant.’ His quip could easily be applied to the modern tech sector, where rapid changes have enabled us to bank from our phones and make payments with the touch of a button, writes Pillsbury’s Sam Pearse

Sam Pearse, Pillsbury

RBI 748 April 2018.indd 26 13/03/2018 13:50:13

Page 3

Key Issues

∤ How is the regulation change set to challenge industry practices?

∤ What is the future of Europe without Britain?

∤ How can the private banking industry in Germany rival its neighbours?

∤ Is Germany the traditional wealth hub we all know or will it become the new FinTech centre?

∤ How can robo-advisors present opportunity to traditional wealth managers?

∤ How are FinTech start-ups rivalling the market?

∤ How can firms remain cyber safe and raise their security profile?

∤ Can collaboration between incumbents and FinTechs be the next big thing?

∤ Discovering Germany’s best kept investment secrets

∤ How can banks leverage technology to strengthen the human relationship?

∤ An insight into the next generation and how they are shaping the industry

SHAPE THE FUTUREOF PRIVATE BANKING

HEAR ∤ NETWORK ∤ DISCOVER ∤ CELEBRATE

Private Banking and Wealth Management Germany 2018

24th April 2018 ∤ Villa Kennedy, Frankfurt

Our launch Private Banking & Wealth Management: Germany 2018 Conference & Awards brings together private banks, family offices,

independent wealth managers and intermediaries in an active discussion of the key issues facing the industry. The informative and inspiring

keynote sessions and informal conversations provide setting for you to join other high-profile guests in engaging discussions.

For more details please contact:

Vicki Greenwood on [email protected] or call +44 (0) 20 3096 2580

Brand Sponsor Exhibitors Supported by

Untitled-3 1 13/03/2018 15:55

Page 1

Key issues:

∤ Open Banking and the main results of the

first stage implementation

∤ How Millennials are shaping the future of payments

∤ Artificial intelligence and machine learning

∤ Innovation in branch transformation

∤ Digital security and cyber crime

∤ RegTech - Leveraging technology innovation to comply with regulation

∤ Optimising customer experience in today’s competitive environment

∤ Technophiles v Technophobes - meeting the needs of different customers

SHAPE THE FUTUREOF RETAIL BANKING

HEAR ∤ NETWORK ∤ DISCOVER ∤ CELEBRATE

Retail Banking: London 2018

10th May 2018 ∤ London

Retail Banking: London 2018 brings together high-street banks, new market entrants, financial professionals and industry disruptors in an active discussion of the key issues facing the industry: new regulation, digitalisation and

tech innovations that are shaping the future of retail banking.

For more details please contact:

Vicki Greenwood on [email protected] or call +44 (0) 20 3096 2580

Silver SponsorsHeadline Sponsor Event supported byBrand Sponsors

Untitled-3 1 13/03/2018 16:20

Documents

· DISTRIBUTION FEATURE. INSIGHT. Digital-only banking in . Canada: the future is bright, the future is Tangerine? RBC’s MyAdvisor: focus on customer convenience . leads to increas