Exclusive: For banks, digital transformation is no longer an option - It's a survival mechanism
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Exclusive: For banks, digital transformation is no longer an option - It's a survival mechanism

Exclusive: For banks, digital transformation is no longer an option - It's a survival mechanism

In an in-depth interview with Finastra, the world's 3rd largest fintech, we examine the banking sector's struggle to catch up to the times, and look at how digital transformation is about more than just offering services online.

  • Digital transformation in the banking sector is no longer an option, but in fact a survival mechanism
  • Digitalization in banking is more than just offering services online - it's actually about the user experience first and foremost
  • The loyalty customers traditional held to certain bank brands is long gone - but there is a way to earn it back

With fintech firms now a staple of the financial world, AMEinfo had the opportunity to speak with Wissam Khoury, Senior Vice President and General Manager for Middle East and Africa (MEA) and APAC, at fintech firm Finastra. Formed in 2017 by the integration of Misys and D+H, Finastra is the world's third largest fintech company, Finastra has a combined 182 years of experience, and boasts a formidable portfolio of over 9,000 customers, including 90 of the top 100 banks globally. In 2 years, they have amassed $1.9 billion in revenues, and have more than 10,000 employees in their hire. 

Looking to tap into their wealth of knowledge, we had a prolonged discussion with Khoury, who believes digital transformation in the banking sector is no longer an option, but in fact a survival mechanism. 

You can find his insightful reveals below in this in-depth interview.

What type of customers do you deal with other than banks, and what are their needs like?

Finastra provides services across the financial institution spectrum. We offer services to any organization with complex financial requirements such as asset management companies, private banking companies, etc. If you look at our client list, you will find that banks have the lion’s share of our customer base. 

Are regional banks in the MENA region ready for digital transformation?

MENA banks, governments and national agendas are pushing everybody to go digital. The need for this transformation is two-fold. 

Firstly, to remain competitive and or/relevant [in the market]. 

Secondly, it’s because of the requirement of the market here. If you look at the Middle East region, we still have a substantial amount of unbanked individuals. Moving to digitalization would help bring on board many more users into the sector. 

Where are they on this path? Some are way more advanced than others, but there is definitely a long way to reach what I call a full digital service. 

Providing a digital service is no longer optional - it’s more of a survival mechanism. Look at banks two to three years back. Their biggest challenges have been fintech, IT companies and even telco companies – everybody is trying to become a competitor. 

Banks have looked at all these fintechs from the perspective that ‘these companies are coming to take our market share.’ I’ve seen that banks that are going through the digitalization journey have made a leap of faith where they said ‘you know what, let’s work with these guys in order to be able to provide better services to our clients, rather than think of them as competition.’ 

In my opinion, for MENA banks going through digital transformation, it’s not only about how much money they are spending on digital, but about changing their mindset to work with fintech companies to ride the wave of digitalization rather than looking at themselves as being disrupted by fintech companies. 

Read: The Future of Banking: Fintech's Prospects in The Middle East And Africa

Can you briefly run us through the process of a bank transforming its services digitally with the help of Finastra? How do you approach these banks?

Digitalization is a very big word. Many people might think that digitalization is simply having online banking services, through which you’re considered digital. 

If you ask me, I think the focus should not be solely on providing products and services in the digital world, but on how we can change the customer experience. 

Digitalization, in our view, starts with putting the customer at the center when you develop any product or service. Banks, because of their nature, cannot do that as fast as fintechs. That’s because of their legacy; compliance with regulation; and other priorities in the banking sector. For fintech, on the other hand, their starting point is the end-user. 

That’s why when asking about how Finastra can help these banks, it starts with their mindset. Obviously, we provide the technology required, but more importantly, we want to help banks enhance the customer experience. It’s all about opening up the banking system with the concept of open banking and providing a platform where you can take advantage as a bank or financial institution of all the innovation happening around the world. That’s why we had launched our platform for open innovation called FusionFabric.cloud, which is meant to be deployed by banks in order to be able to start innovating using their own products, services, etc. 

Khoury explains that by using this platform, banks can invite universities, system integrators, other technology companies, and fintechs to come and develop or to share their own solutions on this platform. This way, banks are able to integrate and benefit from the latest developments and innovations from the international fintech community, and not just the banks’ own, in days or weeks rather than months or years.  

Read: Exclusive: Reach your dream lifestyle goals with Liv., Emirates NBD’s digital-only bank

How do you convey millennials' needs/expectations to banks in terms of digitizing the banking experience?

Millennials are extremely demanding, expecting similar convenience and services from banks and financial institutions as they expect from those of online retailers for example. Keeping that in mind, banks need to develop their services and solutions taking into account what customer experience they want to provide these millennials. It’s purely how the end user perceives that service. The loyalty for financial institutions that customers had before doesn’t exist anymore. 

Millennials have less patience. They are used to quick, reliable services. For example, utilizing AI to give advice to the end user and anticipate what products would suit their needs best is becoming a must. In the end, the AI (and by extension the bank) have to anticipate what a client wants before they even ask for it. 

What costs are involved for the banks?

Going digital and relying more on technology should bring efficiencies to the game. These efficiencies will translate to lesser costs, in addition to less time being wasted on unproductive tasks. The bank will be able to achieve more with less. 

However, I think we are limiting ourselves if we look at the direct cost of digitalization. The biggest cost for financial institutions to embark on this journey is the change of their employees’ mindset - not technology. The cost is being able to make this mental leap to put the customer at the center and be able to provide a unique experience to them. This change of mindset in my point of view is the biggest cost that financial institutions will face. You have to start from the top: from the shareholder and all the way to the cashier at the bank. 

Read: Have it both ways: AI in banking and capital markets

What are the most prominent ways in which you use technology to offer your services?

Banks and financial institutions are facing many challenges. 

Number 1: Efficiency or cost-cutting. 

Number 2: Exceeding customer expectations. 

Number 3: Remaining competitive while providing new services. 

Number 4: Adhering and complying with all official regulations.

The use of technology fits all four spot-on. Take AI for example. AI brings costs down, improves efficiency, allows the bank to offer new services, and increases customer satisfaction, while simultaneously adhering to regulations. 

Technology is at the heart of achieving their vision and mission by touching the core of every single objective that the bank has.     

Read: US bank breached: More than 100 million individuals' data was stolen

Is the future of banking pointing towards neo banks, and is it fintech firms' job to get them there?Neo-banks and challenger banks are almost similar. Their basis is utilizing technology to be able to provide the full breadth of their services. 

I believe that digital and neo-banks are essential in attracting the unbanked. These banks are also essential not only in the traditional banking services but also other financial institutions such as asset management, insurance, etc. 

Having said that, in my opinion, that does not mean that traditional banking will disappear. These banks are complimentary to the traditional banking system in place. 

However, the traditional costly way of doing banking will soon disappear. Eventually it’ll be a hybrid with more emphasis on digital. 

How is fintech involved in open banking - where are these firms in this equation? If an insurance broker wants to offer services through open banking, for example, how does fintech factor here?

In terms of technology, the platform you deploy – as from Finastra - will allow the bank to integrate easily to an insurance company or the provider of any service, even the car service or online payment tool of the end user. 

The game that open banks are playing now is retaining clients, because, as I mentioned before, the traditionally-held loyalty to banks has diminished, so to increase it, you can only do that through improving customer experience. Theoretically, with an open banking solution, as an individual using banking services, I should be able to go to my bank to not only perform traditional deposit and withdrawal transactions, but also be able to book my holidays, register my home, sell my car, etc. Whatever tool or service I need, with open banking, the bank can integrate into these other institutions and provide it to the end user via the bank itself. 

Read: Open banking: Fintech competition for your financial data is on, and Bahrain is in

What is your opinion of blockchain, and how does it factor in your fintech offerings to banks?

Blockchain is an area that has proven itself to be useful.

At Finastra, we have already launched our first product on blockchain, called Fusion LenderComm, where we partnered with a well-known company, R3. Fusion LenderComm provided a solution mainly aimed at the loan syndication community. 

When you syndicate a loan, many financial institutions have to work together and exchange lots of data and documentation.

With distributed ledger technology, this is naturally secured and stored transparently/permanently on the blockchain. 

So what we have done is developed a solution based on blockchain technology, and we have worked with many banks that have already subscribed to it, including BNP Paribas, Natixis, Societe Generale and NatWest

For the past 20 years, in terms of technology, loan syndication has never changed. Nobody has brought anything new to the table in regards to it. So, by simply using blockchain, we have put enormous value on this line of business. 

Mark Anthony Karam

Mark Anthony Karam was an Editor at AMEinfo between 2018-2021. You can get in touch with him on LinkedIn here: linkedin.com/in/m-a-karam/

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