IBS Journal October 2017
41
“At the moment, everything is done on a batch basis – okay some of the cores are done in real time but they’re all scratching their heads saying, ‘What way am I going to go here? I can upgrade my existing core, which means I have to stop my bank for three years while I fiddle about in the guts of my bank. I can launch a brand new brand and do parallel and drive those segments – or I can get someone else to do it for me and migrate it out to an outsourced service.’ For everyone I talk to who wants to upgrade their systems there are others who want to launch a brand new brand. There is no cookie-cutter solution – CTOs or CIO have to think hard – there are so many options that it’s both a challenge and an opportunity.”
Operating across Europe - the Brexit conversation
He says: “The Brexit conversation is causing a wee bit of a problem for us regarding the uncertainty in the marketplace. We will work through that – it looks as if we’ve got a couple of years now before anything significant happens. In some ways, I think it helps with a conversation around the problem of sovereignty. So, we speak to a bank in France, Holland or Germany and they say – ‘we’ve got an existing service and it’s running out of London and we can’t do
We are in a good place to guide people through a push for strong real-time payments
“
that anymore’, so we ask them ‘Where in the rules does it say you can’t-do that anymore? It’s post-Brexit, but you don’t know the rules post-Brexit - they haven’t been agreed yet.’ They just need to set up an instance in Europe. So, there is that violent reaction without any factual basis.”
“We also see the situation where regions with no legacy infrastructure can leapfrog the stages of development of banks that have to replace all the old kit, and end up ahead of them. The analogy I would use is telecoms in Africa. You don’t see any landlines – they’ve all got mobiles. We got a request from a big African bank – with more than 25 million customers – for an overhaul which is simpler to do because the systems they have are very basic. So, we are seeing new emerging brands in the emerging markets. They will take five to 10 years down the line to emerge but they are coming out.
“As long as these new challenger banks are powered by a brand the customer trusts they will thrive – it makes it easier for me jump on board. And I repeat - it doesn’t need to be a bank. People will buy financial services from a non-bank – the figures show this. This is where the big retailers such as Google and Amazon – and trusted brands like Tesla – have an advantage, as long as they are a brand associated with innovation, customer insights, disruption, these brands under PSD2 can provide real services customers want.”
Making customers sticky
Jennings says that all clients want to make existing customers sticky rather than having to go away and win new ones. “As I said – mobile and other clients are jumping into a new market. A lot of telecoms companies we are working with ask ‘we have a consumer experience how can we broaden it?’. And the regulators are trying to shake everything up. PSD2 will definitely open up new models of banking. These business models are not new – Yorkshire Building Society did it in the past with back-office processes for other companies – and the process will ripple out”.
Jennings believes that the work that the banks are doing through APIs will drive an increased level of openness. However broad the changes have been so far there are many different models still to be born – from the back-office to the customer. HSBC has just launched the aggregating model through the APIs – which is interesting – an existing bank that has decided to open up its data for the benefit of its customers.
Will the High Street banks drive consolidation in the market? Metro bank has only 1 million – so far and has not delivered on its first promises of rapid growth. There will be no considerable shift away from the big banks, but the field is opening up for the customers of all banks. Jennings says: “I’m excited. Are we ready to guide organisations through this process of change? Yes – since we see conscious growth in our progress and our capabilities. We see strong traditional banks and interesting newcomers. We are in a good place to guide people through a real push for strong real- time payments – it is an exciting time to be in financial services.”
FIS PRIORITIES
The roadmap 1 Hosted services have to be aligned to the value chains of banks and have to change the ownership pattern – outsourcing is so yesterday -and FIS has the widest portfolio of products to make hosted services a success. Hybrid is the way forward at the moment.
2 Integration capabilities are now mature enough to open up the old ‘closed shop’ processes – which is good for new entrant banks and extremely good for consumers since it will give them choices and the regulators should encourage them to do it more
3 Consumers still need to have a trusted brand or trusted value statement to persuade them to use more diverse financial services – they don’t have to be delivered by the old traditional big banks – there must be a secure brand that will encourage new products and services.
www.ibsintelligence.com
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