Connect with us

Banking

Collaboration for survival: the rise of partnerships between banks and FinTechs

Collaboration for survival the rise of partnerships between banks and FinTechs

Martijn Hohmann, CEO and co-founder, Five Degrees 

A challenging disruptive landscape

The landscape which traditional banks and financial institutions operate within is changing and now is not the time to re-establish nostalgic ways of working if they are to survive.

Evolving customer expectations caused by digital disruption are resulting in traditional banks struggling to stay ahead of new challenger competitors. Banking customers including startups, scale-ups, large enterprise and blue-chip companies are asking for a more diverse range of products and services as one end-to-end solution.

The involvement of big techs in the banking and finance market, such as Google, Apple, Facebook, Amazon (GAFA) and Alibaba, are intensifying competition. Consumers are now used to fast, personal, safe and always-available portable solutions, and banks need to adopt this approach too.

At the same time, the introduction of regulation has created an obligation for banks to open up their APIs to third parties, or face risking non-compliance and heavy financial penalties. If these institutions are to keep up with changing customer demands while ensuring regulatory compliance, they need to ensure they have the right technology in place. 

Collaborate or die

To overcome challenges caused by a fully digital and highly personalised era, we’re seeing the formation of partnerships between banks and FinTechs across the world becoming the norm.

Martijn Hohmann

Martijn Hohmann

These ‘smart collaborations’ enable banks to align with customer expectations much quicker as they enable more intensive research and development (R&D) that focus on the testing of market strategies, while minimising the risk of reputational damage. The bank is able to act as an incubator establishing a clear overview of the project lifecycle, before launching the new product or service to its customers.

Partnerships between banks and FinTechs accelerate the process of‘Open Banking:’ the opening up of banks’ APIs to third parties, providing a greater array of services for banking customers, and in turn make it easier to achieve full visibility over data to align with GDPR and PSD2 regulation. 

Key steps to collaborating smarter

There are clearly many merits of banks and FinTechs working together. To ensure collaborations operate a best practice framework, the following steps must be taken:

Staying agile: Banks and FinTechs cannot afford to rest on their laurels as the market is rapidly changing. They must continue to ensure that their systems constantly adapt through staying agile.

Innovating: The innovation process is not easy and it takes a long time to get ideas to market. However it’s a pre-requisite and a focal point for future partnership investment. Only innovation can ensure that banks and FinTechs are ahead of customer needs.

Play to your strengths: Banks and FinTechs must play to their strengths with constant and regular dialogue to align strategically, both between themselves and with any stakeholders involved. 

Regulation: Banks should demand a strong partnership with their fintech partners that keeps them both up to date about compliance, regulation, and licensing requirements that could affect business and collaboration.

Culture: Banks and FinTechs need to deploy a  culture that is focused on continual improvement and adaptation to stay ahead of customer expectations and regulatory change.

Data: Banks and FinTechs need to take full accountability for existing customer data, big-data models and automated decision making, working closely on testing business resilience.

Security: Banks must not be afraid to demand the highest level of security from their FinTech partners, with a focus on continuous testing. 

The impact of Banking as a Service (BaaS)

An emerging technology which will re-shape the way banks operate is end-to-end Banking as a Service (BaaS), making it much easier for banks to deliver a full range of products and services over the Web.

End-to-end BaaS is the next step in banking strategy, and it will play a crucial role in the banking industry, accelerating digitisation and providing flexibility that customers are demanding without having to implement costly solutions.

By harnessing the power of end-to-end BaaS, banks not only cater better for evolving customer needs but achieve greater process efficiencies in strengthening their own businesses.

By 2020, smart collaborations are expected to impact up to 80 per cent of existing banking revenue pools, presenting an opportunity for those who are willing to open their doors to partnerships, embracing disruptive technologies and new ways of working.

Banking

What does the future hold for accessing earnings? Introducing the world’s first Earnings on Demand payment and debit card

What does the future hold for accessing earnings? Introducing the world’s first Earnings on Demand payment and debit card 1

By James Herbert, CEO & founder, Hastee

Let’s begin by looking at how our brains are wired. Think about the hunter-gatherer mindset: when we expend effort, we expect an immediate reward.

It’s therefore no surprise that over time, different areas in society have adapted to our nature as humans. Almost everything we want, we can get on-demand. Whether it’s instantly streaming movies on Netflix, online shopping from Amazon, or fast-food delivery from the likes of Just Eat. And, because of such technological innovations our expectations have accelerated when it comes to the pace of delivery. This isn’t individual to us as consumers in our day-to-day lives, it’s also reflected in the workplace. We ultimately want work to work for us.

Part of this of course comes down to accessing wages. Workers should be able to access a portion of their earned wages whenever they need it, in advance of the monthly pay cycle – whether to help during challenging times or in day-to-day life. We solved this solutionBut, to take this up a level, ready for the future, we introduced the world’s first Earnings on Demand contactless debit card, powered by Visa – giving users access to their accrued earnings in real-time, with the card’s balance dynamically increasing every day they work.

So what is the card, and how will it change how we access earnings in the future?

The basis is very much the concept of Earnings on Demand. At university I set up a company called Brightsparks to connect students with work opportunities so they could earn money. Yet I noticed a common trend. With students often having to wait for the monthly pay cycle to get their earnings, many were having to turn down work simply because they couldn’t afford the travel day-by-day. It became very apparent that not having £20 today could stop them earning £200 tomorrow.

It struck me that payday itself doesn’t have to be a rigid construct that people have to wait for. But this isn’t specific to students. Liquidity is a widespread issue faced by people in all industries and of all ages, and according to our most recent Workplace Wellbeing Study, 82 per cent of people turn to high-cost methods of financing to tide them over when needed.

The Hastee Card effectively makes wages directly accessible: it simply lets people spend a portion of  what they’ve already earned.

Some people might wonder why they’d want to step away from the standard monthly pay cycle. But consider this: the monthly payroll (via a cheque) only came about in the 1960s as an Act of Parliament. Before this, most people were paid weekly in cash. The first major firm that shifted to monthly payments did it for cost-cutting. It worked for the employer more than the employee. In fact, that firm’s employees had rejected their employer’s change of payment type when it was first trialled a decade before (look up ‘Pye Radio’). So the way that workers and organisations interact around pay is not set in stone – it changes as technology and society shifts.

The way we perceive and use money keeps evolving. Apple Pay, Monzo, and PayPal have completely changed the way payments can happen, yet payroll still remains largely unchanged. It’s only a matter of time before disruption becomes more widespread.

Looking at it from the employer side, it has its benefits too. Before the climate changed, businesses were accommodating enhanced workplace benefits such as no-desk policies, flexible or remote working. In all cases by businesses offering more, they tend to see a more engaged, happier and less financially stressed workforce – leading to increased productivity.

Earnings on Demand is ultimately a perk that presents an ethical alternative to high-cost credit options such as payday loans, credit cards and overdrafts. And existing solutions offer zero impact on payroll processes, zero impact on the cashflow of the business and are designed for quick, simple integration.

The Hastee Card is an evolution of this all – preparing for the future. It builds upon and enhances the user experience by reducing friction and offering immediate spending power as well as a path to greater benefits such as cashback and rewards in the not-to-distant future.

Continue Reading

Banking

Going branchless: How banks can keep customers coming through the virtual doors 

Going branchless: How banks can keep customers coming through the virtual doors  2

By Richard Kelsey, Head of Software Sales at Backbase

Though you might be familiar with the popular seaside town of Newquay, you may not be familiar with its historic financial district aptly named, Bank Street. Dozens of banks and building societies have dominated this area since the late 1800s. However, the street hit the headlines recently as, 120 years after the first bank opened its doors, the last bank closed them.

This is not new. Bank closures have been part of the news agenda for years, and now, COVID-19 has further accelerated the physical turning into the digital. Across the globe, banks have had to close or limit the operating hours of their in-person locations, forcing banks to digitise at speed. Keeping the pipeline of digital sales flowing for new clients, increasing digital product origination and facilitating those cross-sell journeys to customers is key to survival.

Digital take up

Delivering seamless digital customer journeys was already a fast-growing priority for banking and wealth management organizations pre-pandemic. Research shows that 38% of customers stated UX as the most important factor when choosing a digital bank. In response, banks have been investing in digital technology and collaborating with third-party providers as they strive to offer a superior customer experience and stay competitive. But the global lockdowns – which have restricted people to banking digitally – have turbocharged these trends. Growing demand for digital onboarding, and digitized services to support the ongoing customer journey, must be matched by effective capabilities though.

Plugging the leaks

Conversion leakage is a particular problem during the digital client acquisition process. With branches shuttered during the coronavirus lockdowns, and subsequent openings and customer footfall likely to be severely limited for the foreseeable future, this leakage presents a major, and costly, challenge as institutions seek to convert digital sales and boost their return on investment.

The key is understanding why leakage happens in the first place and time and time again, there are three main trends that cause the most problems:

  1. Switching from a customer’s current provider is too difficult (for example, in transferring bill payments and direct debits).
  2. The digital process is too cumbersome (particularly where existing offline processes are simply put online).
  3. Customers lack human touchpoints and advice when they need it (especially for more complex products).

Combating these levels of leakage requires firms to take an outside-in approach, to see the process from the customer’s perspective. From this viewpoint, they can design a more customer-friendly experience that streamlines the job at hand.

One way to simplify the acquisition journey is to incorporate human/AI advisor interventions at points of friction, where customers may become stuck. Another is to adopt retargeting strategies that address customers who abandon the application process partway – for example, by storing their details in a CRM system and sending them notifications to complete the application, or referring them to an outbound call centre employee who can pick up the process by phone. Such approaches can boost completion rates by 40%, delivering substantial benefits to the bank.

Stronger digital growth

Banks’ return on tangible equity has plateaued globally at approximately 10.5% over the past decade, and the lower-for-longer interest rate environment will add to the pressure. Addressing cost-income ratios has become a matter of urgency.

Firms now face a strategic inflection point. Continuing with old business-as-usual practices will leave institutions struggling to attract new (especially younger) clients, while grappling with an exodus of existing customers and an overburdened cost base. But by digitising processes to enhance the client experience, banks and other financial institutions can increase their revenues and reduce costs, and have a loyal customer base who don’t feel the impact of the branchless bank.

Continue Reading

Banking

Shawbrook Bank “cautiously optimistic” as it Publishes Half Year Report for 2020

Shawbrook Bank “cautiously optimistic” as it Publishes Half Year Report for 2020 3
  • Financial performance impacted by the pandemic
    • Expected credit loss (ECL) charges of £45.8 million recognised on loans and advances to customers
    • Profit before tax (PBT) was impacted by the adverse effects of COVID-19 and the subsequent provisions set aside, reducing by 89% to £5.9 million
    • Customer deposits rose by 25% to £7.6 billion while capital remained strong with a CET1 ratio of 12.3%
    • A total of 15.9k payment holidays granted across the Group
  • The specialist bank continued to operate effectively through COVID-19
    • 98% of employees moved to remote working within days and no staff furloughed
    • Successfully achieved accreditation under UK Government’s CBILS
    • Continued investment in technology to digitalise the business
  • Shawbrook “cautiously optimistic” as momentum begins to return to certain specialist sectors

Shawbrook Bank has today (Monday 10 August 2020) published its half year financial results for the period ending 30 June 2020.

The specialist bank confirmed it had set aside £45.8 million of provisions to provide for potential future loan impairments caused by COVID-19. The bank reported it had also granted a total of 15.9k payment holidays to support its customers through the pandemic, of which 10.8k remained in force at 30 July 2020.

As a result of such provisions, the bank’s profitability was impacted with a reduction in PBT by 89% to £5.9 million.

Despite the challenging market conditions, the bank retained its active position in the UK savings market, increasing its retail savings deposit base by 25% to £7.6 billion. During the period, Shawbrook also successfully completed a £75 million Tier 2 re-financing to further optimise its capital structure.

Ian Cowie, Shawbrook Bank’s Chief Executive Officer, said that COVID-19 has had a clear impact on the bank’s financial performance, but Shawbrook remained in a position of strength.

He commented: “Prior to COVID-19, the Group had continued to make good financial progress, starting 2020 with a strong balance sheet and prudently positioned capital and liquidity base.

“To further optimise the Group’s capital structure, during H1 2020 we initiated a Tier 2 refinancing and, despite the challenging market conditions, successfully completed the £75 million issuance in July.

“We have also maintained our active position in the UK savings market. However, the longer-term economic impacts of the pandemic remain hard to predict and as a result we have recognised expected credit loss charges in the period on loans and advances to customers of £45.8 million and on loan commitments of £1.5 million.

“While this has clearly had an impact on profitability, our capital strength positions us well to support our customers and grow our business in line with appetite as we enter the second half of the year.”

Throughout COVID-19, Shawbrook maintained full operational functionality, with no staff furloughed and 98% of employees transferred to remote working within days of the UK lockdown being announced.

The bank adopted a series of concession opportunities across its product range to help alleviate the financial impacts of COVID-19 on its customers. During this time, Shawbrook also successfully achieved accreditation to the UK Government’s Coronavirus Business Interruption Loan Scheme (CBILS) to provide further funding support to its SME clients.

Mr Cowie added: “Since the outbreak of COVID-19, our focus has remained on supporting our staff, customers and partners while at the same time safeguarding the long-term sustainability of our business.

“When the UK lockdown was announced in March 2020, we acted with speed and agility, moving to an almost entirely remote operation within days. Led by a stable and experienced management team and with the support of new and existing technology, we have continued to operate effectively throughout this period.”

Throughout the first half of the year, the bank also continued to identify investment opportunities to further digitalise its proposition, with a core focus on its SME offering.

Mr. Cowie added: “Notwithstanding the pandemic, we have continued to invest in our business to help drive our strategic ambition to become the UK’s Specialist SME Lender of Choice. As well as the ongoing deployment of targeted digital solutions across the Property, Consumer lending and Savings businesses, our investment in the development of a new growth platform in our Business Finance franchise will serve to further modernise our offering, delivering an enhanced customer journey as well as significant operational efficiencies.”

Looking to the future he continued: “Although significant uncertainties regarding the broader macroeconomic impact and pace of recovery remain, we are cautiously optimistic in our outlook as we start to see signs of momentum returning to certain of our specialist sectors.

“Our management expertise and prudent approach to credit decisioning, combined with investment in our digital propositions, means we are well positioned to adapt and respond to opportunities as they arise throughout the second half of the year.”

Continue Reading

Call For Entries

Global Banking and Finance Review Awards Nominations 2020
2020 Global Banking & Finance Awards now open. Click Here

Latest Articles

What does the future hold for accessing earnings? Introducing the world’s first Earnings on Demand payment and debit card 4 What does the future hold for accessing earnings? Introducing the world’s first Earnings on Demand payment and debit card 5
Banking3 hours ago

What does the future hold for accessing earnings? Introducing the world’s first Earnings on Demand payment and debit card

By James Herbert, CEO & founder, Hastee Let’s begin by looking at how our brains are wired. Think about the hunter-gatherer mindset: when...

Honest services wire fraud and the need for caution on multilateral development bank projects 6 Honest services wire fraud and the need for caution on multilateral development bank projects 7
Business6 hours ago

Honest services wire fraud and the need for caution on multilateral development bank projects

By Joshua Ray, Legal Director, Rahman Ravelli www.rahmanravelli.co.uk A recent court case extended US prosecutors’ extraterritorial reach for tackling corruption....

Teaching children about wealth management and why there has never been a better time 8 Teaching children about wealth management and why there has never been a better time 9
Finance7 hours ago

Teaching children about wealth management and why there has never been a better time

By Annabel Bosman is Managing Director and Head of Relationship Management at RBC Wealth Management As we approach the end...

Do your contracts and policies stand up to the Covid-19 test? A view from the UK 10 Do your contracts and policies stand up to the Covid-19 test? A view from the UK 11
Business8 hours ago

Do your contracts and policies stand up to the Covid-19 test? A view from the UK

By Amy Cooper of Ius Laboris UK firm Lewis Silkin The coronavirus pandemic and lockdown have stress-tested employment contracts and policies,...

Board Report Highlights Complex Decision-Making Process Across Banking and Finance sector 12 Board Report Highlights Complex Decision-Making Process Across Banking and Finance sector 13
Business20 hours ago

Board Report Highlights Complex Decision-Making Process Across Banking and Finance sector

‘The State Of Decision-Making’ report from Board, reveals business decisions made in silos without modern planning tools A third (33%)...

Going branchless: How banks can keep customers coming through the virtual doors  14 Going branchless: How banks can keep customers coming through the virtual doors  15
Banking8 hours ago

Going branchless: How banks can keep customers coming through the virtual doors 

By Richard Kelsey, Head of Software Sales at Backbase Though you might be familiar with the popular seaside town of Newquay,...

Shining a spotlight on operational resilience and cyber-risk in financial services 16 Shining a spotlight on operational resilience and cyber-risk in financial services 17
Technology1 day ago

Shining a spotlight on operational resilience and cyber-risk in financial services

By Miles Tappin, VP of EMEA for ThreatConnect, explores why the financial services industry must build a cyber security strategy...

EaseUS Free Data Recovery Software Recover Lost And Erased Documents 18 EaseUS Free Data Recovery Software Recover Lost And Erased Documents 19
Technology1 day ago

EaseUS Free Data Recovery Software Recover Lost And Erased Documents

Have you anytime inadvertently masterminded erased or lost data from your work territory or PC? In case along these lines,...

Shawbrook Bank “cautiously optimistic” as it Publishes Half Year Report for 2020 21 Shawbrook Bank “cautiously optimistic” as it Publishes Half Year Report for 2020 22
Banking1 day ago

Shawbrook Bank “cautiously optimistic” as it Publishes Half Year Report for 2020

Financial performance impacted by the pandemic Expected credit loss (ECL) charges of £45.8 million recognised on loans and advances to customers...

Shining a spotlight on operational resilience and cyber-risk in financial services 23 Shining a spotlight on operational resilience and cyber-risk in financial services 24
Technology1 day ago

Shining a spotlight on operational resilience and cyber-risk in financial services

By Miles Tappin, VP of EMEA for ThreatConnect, explores why the financial services industry must build a cyber security strategy...