IBS Journal March 2017


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Enhancements in AI are opening doors to endless opportunities. These engines can replace previously labour-intensive programming workloads, and allow us to incorporate many more data sources. For example, we’re using AI from both natural language processing (NLP) and analytics bases to build a framework, so that our business lines can learn from one another. In addition, Splice Machine, a company in our FinTech Startup Accelerator programme, is helping us discover data-driven insights to help drive predictions.”


Thomas cautions, however, that “the best technology in the world won’t matter if we don’t know what to do with it” and stresses the need to find the “right talent” and for the bank to “organise itself around enabling these highly skilled team members to do their thing” and “re-imagine how we work.”


FinTech ‘co-opetition’


The threat from newcomers to the retail banking market, such as Atom, Fidor, OakNorth and so on is real, but it is often targeted at niche customer segments such as Millennials or entrepreneurs and it is small-scale at present, and reliant on traditional banks not responding aggressively. In fact, what most banks are doing is co- operating where they can with FinTechs and competing in other areas. It is a model that is often referred to, somewhat clumsily, as ‘co-opetition’.


“If customers flock to these so-called ‘challenger’ or tech-based ‘neo’ banks, which typically use data better as they do not have legacy IT or silos caused by past acquisitions, additional regulatory obligations and costs might hinder them as they approach Tier 2 or 3 status,” says Zhiwei Jiang, Global Head of FS Insights & Data at Capgemini. He doesn’t believe they’ll have a major impact in future years as the excitement around FinTech innovation recedes and tech lessons are learnt by incumbent banks, barring perhaps one or two standout startups that may infiltrate the market on a truly large scale.


As Szymon Mitoraj, Head of Digital at ING Poland, says: “You shouldn’t ignore FinTech startup innovation and clever data apps. But I only really fear the bank that cooperates with them better, not them as standalone entities.”


“It is strategy and end use applications that matter, not technology in and of itself,” adds Mitoraj, who was recently at FinovateEurope 2017 in London showing off his bank’s new MyING advisory and finance management mobile tool. This uses analytics to offer savings tips, targeted loan offerings, drop-down data filtering menu options and a search capability. Speaking exclusively to IBS Journal after his demo at the show, Mitoraj explained MyING has “already been used by two million customers in the last six months in Poland”, which is scale “FinTech firms can only dream about…There was a huge amount of data to consolidate but we were helped by the lack of legacy IT in our bank locally and Poland generally.”


Interestingly ING is also trying to re-enter the UK retail bank market from its Dutch home base via the Yolt app. This mines customer account data across different bank accounts – whether HSBC, Barclays or wherever – and then provides tips on budgeting and savings. Yolt can also predict balances, based on standing orders and direct debits, and has various alerts for overdrafts, due payments, spending pattern analytics and so forth. It effectively acts as an aggregator – a money supermarket if you like – and could offer ING a FinTech route back into the UK market it left five years ago.


Yolt is an example of how open APIs and banking – encouraged by the EU’s PSD2 and other such regulatory initiatives, not to mention recent technological advances – may disrupt the marketplace. However, banks will naturally look to develop their own responses and to make their own service and products good enough to dissuade people from switching.


A flood of customer account data will result from open APIs, which could be used by secure newcomers, challenger banks, FinTechs and so on to shake up the marketplace, as happened in the insurance market where aggregators initially flourished. The long-term success, or otherwise, of retail bank aggregators offering alternative services will depend upon how the banks’ respond.


According to Capgemini’s Jiang it is large scale Asian, Latin American and Middle Eastern banks, with newer IT and “less legacy drag” that are likely to be the true competition and/or template for established Western banks to follow, not neo banks that lack scale. He thinks the best banks need to do three things to help improve their customer


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