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Allica Builds a New Digital Bank From Scratch in Under 12 Months With MuleSoft

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Allica Builds a New Digital Bank From Scratch in Under 12 Months With MuleSoft 1

UK challenger bank creates connected, personalized experiences for small and medium businesses 2x faster with reusable APIs

MuleSoft, provider of the world’s #1 integration and API platform, today announced that Allica Bank is deploying MuleSoft to deliver a connected, personalized banking experience for small-to-medium-sized enterprises (SMEs), which account for three-fifths of employment in the entire UK private sector. With a focus on established SMEs (5-100 employees), Allica is on a mission to empower these businesses to succeed. Allica Bank combined relationship banking with modern digital banking experiences to launch a new digital bank from scratch in under 12 months – two times faster than any of its competitors. By unlocking and integrating data across systems and applications, MuleSoft is helping Allica Bank gain a single view of its customers and provide SMEs with a straightforward and streamlined banking experience.

“The established SME community in the UK is profoundly underserved when it comes to banking,” said Simon Bateman, CIO, Allica Bank. “At Allica, we’re giving these SMEs access to the modern, straightforward digital banking tools many have come to expect from their consumer bank. And then we’re backing this up with the tailored and local advice that we know they both want and need.”

“To have been able to build a bank capable of this in 12 months is staggering. MuleSoft has been a vital partner to us on this journey, playing a central role as we develop a modern bank with integration at the heart.”

Reimagining the digital banking experience

According to the Connectivity Benchmark Report 2020, less than half of IT leaders in the financial services industry say they are able to provide a completely connected experience. As a result of disconnected experiences, 51% of global consumers would consider changing their bank. Allica Bank addressed this challenge by putting their customers at the center of every interaction. The bank created highly differentiated experiences, such as delivering personalized services based on customer profiles and enabling customers to self-serve and manage finances on their own time.

To quickly create these seamless and new customer experiences, Allica Bank engaged MuleSoft professional services and consulting partner, Whishworks, to implement MuleSoft’s Anypoint Platform™. Whishworks built more than 300 APIs on Anypoint Platform, enabling Allica Bank to unlock and unify data across disparate systems, such as customer databases, document management systems, and business process management systems. By creating reusable building blocks as APIs, Allica Bank is able to rapidly compose new business capabilities in days or weeks instead of taking months to build from scratch with custom code. With this speed and agility, Allica Bank built its digital bank two times faster than its competitors and was granted its UK banking license in September 2019.

“Much of our success comes from our ability to work with partners who enable us to build quickly and add new capabilities on the fly,” said Bateman. “MuleSoft has been critical to our business strategy to collaborate with an ecosystem of partners and create new revenue channels, fast.”

Building a foundation for speed 

With MuleSoft, Allica Bank plans to expand into new distribution channels and scale by continuing to work with third-party suppliers and partners to extend its suite of financial services products. For example, Allica Bank has been able to provide a true omnichannel digital banking experience by working with banking technology partners, including Profile Software to support its savings accounts and commercial mortgage lending and Netsol to introduce asset finance for customers.

As a composable enterprise, Allica Bank can easily unlock its backend systems and connect them with trusted third-party suppliers to develop a range of other new customer-facing services. With easily discoverable APIs and integrations, the bank is empowering an ecosystem of internal and external developers to deliver more value for customers with speed, agility and innovation.

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Banking

A quarter of banking customers noted an improvement in customer service over lockdown, research shows

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A quarter of banking customers noted an improvement in customer service over lockdown, research shows 2

SAS research reveals that banks offered an improved customer experience during lockdown

A quarter (27%) of banking customers noted an improvement in their customer experience over lockdown, according to research conducted by SAS, the leader in analytics.

This represents some good news for banks in an extremely challenging time, with 59% of customers also saying they’d pay more to buy or use products and services from any company that provided them with a good customer experience over lockdown.

The improvement in customer experience also coincides with a rise in the number of digital customers. Since the pandemic started, the number of banking customers using a digital service or app has grown by 11%, adding to an existing 58% who were already digital customers. Over half (53%) of new users plan to continue using these digital services permanently moving forward.

Brian Holden, Director, Financial Services at SAS UK & Ireland, said:

“It’s notable that in times of need customers value being able to communicate with their bank and place an even higher value on good customer service. A rise in the number of digital customers means banks can now reach a wider audience online, leveraging AI and analytics to offer a more personalised experience.

“There is work to be done, though. Even greater personalisation is needed if banks are to win over the 12% of customers who felt banking services deteriorated over lockdown. And this personalisation will need to get right down to a segment of one to properly reflect the unique circumstances some individuals now find themselves in due to the pandemic.”

While the number of digital users grew over lockdown, there is still a quarter (24%) of the banking customer base that have chosen not to make the switch to digital services.

Meanwhile, failure to offer a consistently satisfactory customer experience could prove costly for banks, with a third (33%) of customers claiming that they would ditch a company after just one poor experience. This number jumps to 90% for between one and five poor examples of customer service, so this just underlines how much retail banks can win or lose in these difficult times.

For more insight into how other industries across EMEA performed during lockdown, download the full report: Experience 2030: Has COVID-19 created a new kind of customer? 

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Banking

Swedish Bank Stress Tests in Line with Recent Rating Actions

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Swedish Bank Stress Tests in Line with Recent Rating Actions 3

The Swedish Financial Supervisory Authority’s (FSA) latest stress test results show major Swedish banks’ robust ability to absorb credit losses. The results support Fitch Ratings’ view that short-term risks have abated in recent months, and are in line with Fitch’s assessment of major Swedish banks’ capitalisation at ‘aa-‘, which was a factor when Fitch removed the ratings of Handelsbanken, Nordea (not covered by the FSA’s stress test) and SEB from Rating Watch Negative in September.

The FSA estimated about SEK130 billion of credit losses over 2020-2022 for the three largest banks (Swedbank, Handelsbanken and SEB) under its stress test. This represents about 220bp of their loans, or about 70bp annually. However, the banks’ pre-impairment profitability in the stress test could absorb credit losses of up to about 110bp of loans annually. Fitch’s baseline expectation is for credit losses below 20bp of loans in 2020 and 8bp-12bp in 2021.

Capital remained strong under the stress test. The average common equity Tier 1 (CET1) ratio fell by only 2.8pp (1.9pp if banks did not pay dividends) from 17.6% at end-June 2020. The capital decline was not driven by credit losses, which could be absorbed by pre-impairment profitability, but by risk-weighted asset inflation.

The three banks’ 3Q20 results showed that capital has been resilient despite the coronavirus crisis. The banks had a CET1 capital surplus over regulatory minimums, including buffers, of almost SEK100 billion (excluding about SEK33 billion earmarked for dividends). SEB had a CET1 ratio of 19.4% at end-September, Handelsbanken’s was 17.8% and Swedbank’s 16.8%.

The SEK130 billion credit losses under the latest stress test are lower than under the FSA’s spring 2020 stress test (SEK145 billion), which also covered a shorter period of two years. However, they are still larger than the actual losses incurred by the three banks during the 2008-2010 crisis. This is despite tightened underwriting standards by the three banks in recent years, including, in the case of SEB and Swedbank, in the Baltics, the source of most of their loan impairment charges in the previous crisis.

In its baseline economic forecasts, the FSA assumes a harsher shock to Sweden’s GDP in 2020 and 2021 (-6.9% and 1%, respectively) than Fitch’s baseline (-4% and 3.4%), although it assumes a similar recovery by end-2022. It also assumes real estate price corrections, which appears particularly conservative in light of a 11% housing property price increase over January to November 2020.

The ratings of Handelsbanken (AA), Nordea (AA-) and SEB (AA-) are on Negative Outlook due to medium-term risks to our baseline scenario. The rating of Swedbank (A+) is on Stable Outlook, reflecting significant headroom at the current rating level following a one-notch downgrade in April due to shortcomings in anti-money laundering risk controls.

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Banking

Future success for banks will be driven by balancing physical and digital services

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Future success for banks will be driven by balancing physical and digital services 4

Digital acceleration due to COVID-19 has not eliminated the need for bank branches

Faster service (23%), smaller queues (26%) and longer opening hours (31%) are among customers’ biggest asks of their bank branch, new research from Diebold Nixdorf today reveals. But with 41% consumers saying they would be comfortable to engage with all banking services via an app, it is vital that banks respond to the full spectrum of customer needs – balancing and evolving their offerings on multiple fronts.

A third (35%) of customers say they will always want access to physical, in-branch banking services in some capacity and one in ten (10%) consumers will never bank predominantly online in the future. This demonstrates that there remains an important role for the services a branch provides. This role, however, continues to shift away from purely transactional banking:

  • A quarter (26%) value face-to-face advice when it comes to their banking needs

  • One in five (18%) seek advice on different products

  • 17% want to speak to the staff or other customers.

Matt Phillips, Diebold Nixdorf vice president, head of financial services UK & Ireland, said: “The majority of banks have spent the last decade focusing on their digital strategies and investing in improving – or establishing – their online customer experience. However, the data shows that there is still an essential role for physical branches. Banks now increasingly face the challenge of continuing to provide customers with access to a range of physical and as well as digital services, giving them the flexibility to choose the best service for them at any given moment in time.”

When looking beyond the impact of COVID-19, planned branch visits by customers are expected to rebound to 28%, following a dip to 11% during lockdown. And when asked about the new services they’d like to see inside their bank, sixteen percent of respondents said more self-service machines would improve their in-branch experience.

Matt Phillips continues: “In a world that is fast evolving and where the future is digital, there’s no doubt that high street banks must, and are, responding to the needs of highly digital customers. But not every customer requirement is digital. There is still a strong need for physical bank branches and the interaction and services they offer, and striking this balance between physical and digital is where the industry must come together to provide solutions. For example, building a strong, leave-behind strategy is something we’re seeing across the board when banks have to close branches, ensuring customers have access to self-service machines to complete all their transactional needs.”

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