The digital conference centred on the important topic of how technology can be used to increase access and build new services for customers. Learn more about the takeaways in part two of the Q&A series or watch the fireside chat below.
Liz: You talked about banks creating these ‘special snowflakes’ and customised products. How big of a danger is that to the speed and agility that the FI industry desperately needs to adopt going forward?
Werner: It’s a gigantic danger. It’s not just in banking, it’s in IT, insurance companies, they’ve built up huge technical debt in the last decades. They have thousands of people employed in their IT departments. The language is often written on the mainframe where people may not even be around anymore who understand the language.
You obviously want to configure the solution to your branding and so you can offer certain products, but you don’t want to create your own version where you need to do robust coding. If you do this in the right architecture and environment, as is the case with Mambu offering a pure SaaS service, all customers have the same code base. This means that when we make a change, it gets pushed to everyone in a day. You don't even have a chance to build your own fork in the software.
There are banks that choose a core banking application off the shelf, but then they customise this until it’s no longer ‘off the shelf’. Instead it becomes homegrown and carries heavy technical debt. The problem is then they’re not flexible and fast and always dependent on their own releases. You can only break this by making a paradigm shift.
Liz: There's been a lot of M&A activity in the fintech and finance space lately. Just earlier today, HSBC bought a $35M stake in the fintech company Monese. What impact is this activity having on the industry and how banks serve their customers?
Werner: This goes back to my earlier point about fintechs getting less funding and banks moving more steadily into this space. Incumbent banks are all looking to break this stalemate situation. They either create their own digital arms or acquire tech that’s on the market to better serve the needs of their customers. This is filling the gap of the less risk capital and less banking licences. There is clearly a need in the market, and it’s an opportunity for incumbents to catch up faster in this space.
Liz: The underbanked and unbanked tend to be left behind in this shift to digital. What more can be done to make sure that doesn’t happen?
Werner: Empowering the unbanked was the reason that Eugene and his fellow co-founders started Mambu nearly 12 years ago. They wanted to bring banking to the underbanked and to make banking and financial experiences delightful. This starts with the regulator. In some countries microloans finance everything because people don’t have the starting capital otherwise. Similarly not everyone has a passport to identify themselves, so if this is a requirement for opening a bank account for example, this is a barrier. There is a lot regulators can do to decrease these entry barriers as fintechs try to serve these markets.
Liz: Let’s talk about the cloud. How do you deal with risk and compliance and KYC (know your customer) in a cloud environment?
Werner: The cloud environment does not change much from the core functionality of the onboarding, KYC, AML (anti-money laundering), or further capabilities. Cloud only changes the setup of how it runs and where the data resides. The big cloud providers have data centres mapped out across the world, so data sovereignty as a topic is not an issue anymore. From a security standpoint, Amazon, Google Cloud and Microsoft have stronger security and expertise than all IT departments combined. It’s a gut feeling that turns people away from cloud, but the reality is that the security is much better with these big providers. In the end, security risks are often from the human rather than the tech itself. There is still some hesitation, but this is changing.