PBI’s Jamie Crawley attends Finovate Europe to sniff out the latest cutting-edge fintech ideas and find out what private banks have still to learn from financial technology
Bathed in blue neon and with an indie electro Spotify playlist on repeat, Finovate’s European conference in London felt a million miles from the horticulturally-laden foyers and panelled offices of some private banks a stone’s throw away.
And yet this conference, where fintech firms show-off their latest innovations through 7-minute live demonstrations, is well attended by senior banking figures eager to understand the direction financial technology is moving.
Attendees vote for their favourite demo and awards given to the eight most innovative platforms. These are often followed by major investments, either in the form of venture capital or acquisitions. Last year’s £45m investment by Goldman Sachs into British wealth-tech platform Nutmeg was fresh in the memory of many presenters and attendants alike at this year’s Finnovate Europe.
Fintech and private banks have differing perceptions of each other, however. Talking to the many fintech companies showing off their wares, one received blunt assessments of private banks’ digital offering. “They are terrible,” was the view of one.
Jo Howes, commercial director of Fintech 100 company, Crealogix, told PBI, “I reckon they’re about eight years behind. I was talking to retail banks about digital transformation around eight years ago, and they were giving me all the same reasons not to progress that the wealth managers are giving me now.”
Crealogix was among the eight winners of the ‘Best of Show’ award for the third year in a row, thanks to the prototype of its TimeWarp platform, which will provide a visualised insight into the possible outcomes of financial decisions.
Another repeat winner was cyber-identity company, iProov, whose latest offering enables banks to verify customers using palm authentication technology. “We’re helping a bank like Rabobank sort out all their KYC requirements for mobile-enabled customers in 35 seconds,” founder and CEO, Andrew Bud, said. IProov already offers a biometric verification platform that can be used for on-boarding new clients.
The other six companies to take home ‘Best of Show’ awards were Dorsum, Glia, Launchfire, PayKey, Voca AI and W.UP.
After two days of ADHD-friendly 7-minute demos, the third day of the conference brought insight and opinions from some leading figures from the worlds of finance and tech. Here are some of the takeaways for the private banking and wealth management sectors.
Challenging times for Challengers
Tandem’s delivery director Ben Lillywhite talked about the challenger bank’s story and its immediate future. Tandem, of course, has resonance with the private banking world due to its acquisition of Harrods Bank in March 2018, along with its 10,000 customers and £80m ($103m) in capital.
“Adding the Harrods balance sheet to our book gave us crucial revenue, as well as making sure those customers were able to continue their mortgages and savings using equivalent products,” Lillywhite said. “It really diversified our customer base as well, with some really interesting new customers, which was great.”
Lillywhite said cash injections are crucial for challenger banks to compete with established players: “Like it or not, that is the hard reality of working in a challenger bank for three years. The big banks have spent many, many years building up a competitive advantage. So, in order to play with them, and help drive the agenda forward, we’re going to need to generate some of that ourselves, and add further revenue streams in order to make our business plan get around, which is really quite difficult if you’re not charging customers all those pesky fees.”
Pink products are not a solution
Former-UBS managing director-turned-innovator, Olga Miler, spoke of the tribulations she experienced in producing data needed to implement an efficient customer segmentation strategy at the Swiss bank.
“UBS were probably one of the pioneers in establishing a segmentation strategy for women. Over the years, this proposition evolved into millennials and into the older people.
“For two years, I was sitting there trying to figure out how many female clients we had, where we were losing them, what products they held, and how satisfied they were. It took 18 months to get a global view so that the figures were reliable enough.
“I wish I had had the data sets of Netflix and Spotify – for me it was legacy systems and Excel spreadsheets!”
Miler went on to describe the benefits of focussing on the preferences of women but warned against the temptation to integrate new products purely on the assumption that they will appeal to them.
“Women need financial advice the most: when it comes to divorce, they are the most disloyal customers; when it comes to widowhood, seven out of 10 will leave the bank, which is a huge outflow.
“This notion that we always the need to push out more products: I think we have all the products we need. We need to teach clients how to use them. Pink products will not fix it: focus on the experience.”
Delegating data management
With GDPR still less than nine months old, many companies are still getting to grips with the regulation itself, never mind integrating any new technology to facilitate their requirements to it. Beverley Aspeling, Credit Suisse’s managing director and data protection officer, spoke on this subject, identifying some of the areas where fintech can be of service.
“The area where we’ll continue to look at technology solutions are on things like boundary control: data loss prevention and scanning solutions that identify a certain risk-profile of data as it’s about to leave the firm.
“The other area is search engines: holistic search tools that have the ability to find very particular information across the multiple data stores in a firm the size of ours.
“There a lot of really good companies out there – we’ve seen a lot of them at Finovate – that have these capabilities. The issue is, can you bring them into a financial institution and point them at the thousands of types of applications and systems that we have and give you a good result that won’t drown you in data for a month?”
The importance of being humble
Thierry Derungs, chief digital officer at BNP Paribas Wealth Management spoke to PBI about the work done since his appointment seven years ago in driving the brand’s digital offering, culminating in the launch of its myWealth platform. Far from allowing digital capabilities to steamroller all strategies, however, Derungs stresses the importance of keeping them in step with client expectations.
“We have really changed the way we are working inside wealth management to be more agile,” Derungs told PBI. “Having business driving digital innovation allows us to work differently. When we are working on new initiatives, we involve our clients directly from day one.
“That, for me, is most important because we don’t imagine what the client wants; we work with them directly.”
Bionics in Banking
Benoît Legrand, chief innovation officer at ING spoke of the opportunity that digital innovation can have for private bankers, should they wish to embrace it.
“Private banking is not a world that been disrupted very much…yet,” Legrand told PBI. “What I can see is that we will move into a more bionic world where we move away from the private banker telling the client, ‘Trust me, I’m the only source of truth.’
“There is a natural tendency in private banking to resist change, but I see it as an amazing opportunity to be more effective in private banking. I firmly believe the relationship will be even more important, but it must be a relevant relationship.
“So technology should be helping private banks to get insights into customer behaviour: gathering data on what is important to them, looking at where else they are banking, where they are travelling or whatever. These are insights that can help you be a better private banker, but we’re not there yet, frankly.”