IBS Journal May 2016
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backed by governments: this is where the trust in them as an institution first took hold. Yet we’re still using methods that were popularised during the 19th century. The fact that cheques can take up to 28 days to process payments is “stupid”. While banks still use outdated methods, startups like Venmo make multi-million on very simple ideas. The internet enables ideas to go viral.
The question of how to bring “the hipsters and the suits” together is a major one for the industry, Skinner stated. Regulation and technology are on opposites sides of a cool/uncool divide.
Africa, he continued, is a potent example of how innovation can change an industry landscape. 58% of Kenyans are using mobile wallets, and now the telcos across the continent are coming together to enable pan-African payments.
So what’s the solution, blockchain? “Blockchain is boring” answered Skinner. Banks are using the term in the same way they have used the cloud and Big Data – as a catch-all word for innovation. The reason FinTech is “so hot” is down to the fact that it is moving financial operations from the boardroom to the internet.
Banks have time to adapt but that time is running low. Customers don’t want to go to 100 different companies to get their lending, investments and payments controlled. They want to come to an institution they know and recognise.
The sector needs to stop looking inwardly, according to Laurence Leydon, GM of Financial Services at SAP, who took the stage after Skinner. “We can’t innovate at the scale at which the market needs us to innovate,” he added. Customers are complex, spontaneous, individual and unpredictable, and this required banks to use everything at their disposal – including collaborating with FinTech firms rather than just buying them up.
Ritesh Pai, Senior President and Country Head of Yes Bank, showed an example of digital banking done right. 50% of India’s population is under the age of 24, and the country has the second largest social networking market
in the world. Wallet-based payments, pre-paid cards, 24/7 money transfers and social media integration are all strategies that Yes Bank has implemented, hoping to catch some of the 40 million Indians online every day. Their free online chat service had 24 million customers in 2015, helping a bank that has been in business for 12 years rocket up the popularity charts.
Brett King, CEO of Moven, lead the way in the second day’s talks. “We will see changes in the next few years greater than any in the last 200 or 300 years,” he proclaimed. Bank products will be replaced by machine-to-machine interactions. In 15 years, there will no longer be a physical card.
Robo-advisory will come to know the human race better than we know ourselves, while robots will outnumber us by the year 2030. “We’ve had year-on-year record levels of bank branch closures,” he added. “Paper and signatures will be gone by 2020 and banks will differentiate on experiences, not on products and services.”
King pointed to M’Shwari in Kenya as an example of the future. 80% of its customers have never visited a branch, while its mobile wallet has $83 billion in deposits from users who have never spoken to an advisor. The cost to create an account is just $5, compared to the $250 it costs US banks.
The pace of change is increasing in the Middle East, with numerous transformation processes in place. The change can’t come any sooner, said an attendee from a major Middle Eastern bank to IBS Journal over lunch. Incremental add-ons and modules are needed, and the diversification of technology is crucial to staying relevant in the market as it evolves rapidly.
Attendees and delegates left MEFTECH 2016 knowing in no certain terms that, while some of the predictions at the show may have been outlandish, the banking sector is in a state of flux. Judging by the flurries of conversation and interest in the vendors on show, it’s a future than many FIs are hoping to prepare for well in advance. For further information on industry events, visit our website: www.
ibsintelligence.com
www.ibsintelligence.com
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