Banking technology · FinTech · Mobile payments · Open Banking PSD2 · Payments

The FinTech news/views that caught my eye this week

Shameless plug time. By me. Open Banking/PSD2: the impact on CFOs


The infamous Brexit Bus is now being used to promote a FinTech startup

Glance appoints Spiros Margaris to advisory board

Russian prosecutor’s office summons Burger King for issuing cryptocurrency

HSBC to launch Beta app to allow customers to see accounts from other banks on one screen

Consortium of Japanese banks to launch new digital currency

Koho closes $8 million investment from Portag3 Ventures 

Sainsbury’s trials checkout-free shopping through smartphone app

Tesco launches Pay+ with new Clubcard offer

New UK payment system operator names Paul Horlock chief exec

Onfido raises $30m more for its AI-based identity verification technology

About me: Freelance journalist specialising in FinTech, banking technology and retail technology. Former Editor of FStech, Retail Systems and IBS Journal. Further info here.


The FinTech news/views that caught my eye this week

Ex-Barclays CEO Jenkins bags $46m for his FinTech startup


Jamie Dimon faces market abuse report after his comments about Bitcoin

TransferWise founders to rake in millions from first share sales

Digital challenger CivilisedBank score funding; names Philip Acton CEO

iZettle lands €30m to fund AI research from European Investment Bank

GoCardless raises millions more cash from raises millions more cash from VC investors Accel, Balderton, Notion, Passion Capital

Google debuts Tez, a mobile payments app for India

Research calls out big banks as tech laggards

Commonwealth Bank parks its Apple Pay push, turns to Garmin Pay instead

British supermarket offers payments by fingerprint in worldwide first

Bank branches aren’t dead, just evolving

About me: Freelance journalist specialising in FinTech, banking technology and retail technology. Former Editor of FStech, Retail Systems and IBS Journal. Further info here.

FinTech · Open Banking PSD2

Open Banking/PSD2 Q&A: Rishi Khosla, CEO and co-founder, OakNorth Bank

Tell us about OakNorth and your take on and approach to Open Banking/PSD2. 

Rishi Khosla

Rishi Khosla: Launched in September 2015, OakNorth is a UK bank that provides fast, flexible and accessible debt finance (£500,000 to £20 million) to fast-growth businesses and established property developers. Our loan book stands at c.£700 million with clients including Brasserie Blanc, Leon, Z Hotels, Galliard Homes, Frogmore, The Collective and Pocket Living. In order to help fund our lending, we offer a range of deposit savings products – fixed bond accounts from 12-60 months, as well as easy access and notice accounts – to individuals and businesses.

Generally, Open Banking/PSD2 is a good thing – it will inject some much-needed competition into the UK banking sector and create a more level playing field for payment service providers and third party payment service providers. While we are not a payments provider, we (and our customers) still stand to benefit from being given access to customers’ banking information as we will be able to further improve our credit decision processes and onboard new borrowers in even less time.

Will it be a tipping point for UK challenger banks? Should established banks be worried?

Rishi Khosla: It definitely has the potential to be – the financial sector creates more customer data than several other industries combined, but yet there is very little diversity in product offerings and it tends to perform worse than other sectors when it comes to customer service, trust and customer-focused innovation. PSD2 could dramatically change this and significantly improve the financial experiences of both individuals and businesses.

Established banks should definitely be worried, but I think the threat comes less from new Fintechs and app-based banks, and more from the large non-bank corporations such as Facebook and Amazon which are already operating in this space.

Facebook Payments is operative in the US so an obvious next move for the business would be to launch this service across Europe once PSD2 is live. Amazon Pay was rolled out across Europe last year, allowing users to pay for non-Amazon purchases including government services, insurance and travel, using their Amazon login on thousands of third-party websites. This resulted in nearly doubled volumes.

Meanwhile, Amazon’s Lending division has issued loans totalling over $1.5 billion, enabling SMEs to grow sales by an estimated $4 billion. This is not an insignificant number – it is a genuine bite out of the big banks’ market share.

These multinationals have already proven their ability to innovate in this sector and bring new products and services to market in a fraction of the time that it takes incumbent banks, and in similar timeframes as younger, nimbler Fintechs. What’s more is that customers trust them much more than large banks, and tend to have had better experiences with them.

Why should customers care?

Rishi Khosla: PSD2 would enable consumer platforms that are used on an almost daily basis, such as Facebook, to become their own payments processor and connect to the bank accounts of its two billion users directly through APIs.

This would be hugely helpful for a service like Facebook Marketplace for example where, following permission from the user, Facebook could securely access users’ bank accounts and collect their payments. This would not only create cost savings for the users through automation efficiency and the stripping out of third parties, but it would also eliminate the need for complicated check-out processes, enabling frequent users to make one-click payments.

PSD2 is also likely to ensure the continued progress of Europe’s Fintech innovation boom and bring customers more user-friendly services through digital integration. This is likely to not only improve the payment experience but also the overall service.

From business’ perspective, Nesta recently released the names of the 20 successful entrants to its Open Up Challenge. Launched in February this year, the Challenge is intended to inspire the creation of apps and tools for SMEs. Along with cash awards, Nesta encouraged Fintechs to enter the competition by offering access to a huge dataset of anonymised SME banking transactions.

This gave them a chance to experiment with Open Banking-style datasets in advance of the system’s launch; one of the recipients is using the data to build a product that allows businesses to sign up to its services directly from their business bank account – a process that currently requires approval from the bank; another is using it to make “an online due diligence passport” for businesses looking to prove their financial credentials faster and more efficiently.

From the point of view of a challenger bank, what are the key challenges/issues that need to be tackled in order to make this a success?

Rishi Khosla: Security is the number one priority for us so it will be essential for third party payment providers to detail how they plan to securely handle customers’ bank credentials. As a regulated bank, there are number of compliance and risk standards that we have to adhere to which many unregulated entities do not. We will need to go through a series of authentication processes with the authorised account user in order to confirm that they are who they say they are. We are currently awaiting specific guidance from The Regulatory Technical Standards on this.

Could Brexit throw a spanner in the works? With the UK looking to leave the EU in 2019, could this potentially make PSD2 less effective, bearing in mind that the whole regulation centres around opening up banking systems in Europe?

Rishi Khosla: I doubt that Brexit will prevent PSD2 from happening – firstly, it’s important to remember that the regulation applies to the European Economic Area (E.E.A) not just the EU. While we know we’re leaving the EU, it is very likely that we will have some form of EEA relationship with Europe so we need to be prepared for this. Related to this is the fact that if the UK wants to continue interacting with the European payments and finance industry, it’s going to have to be PSD2 compliant whether it’s part of the EU or not. Finally, if the UK wants to have any chance of maintaining its position as a global Fintech hub, it needs to keep pace with innovation.

What could happen is that the benefits of PSD2 could be reduced as fewer companies choose to launch in the UK, forgo plans to expand UK operations, or in some cases leave altogether. The UK would have been the HQ country of choice for many of Europe’s emerging Fintechs, but the added complications caused by Brexit could see the likes of Frankfurt, Berlin, Copenhagen, etc. reaping the rewards of that decision.

What will be the state of play a year from now? Will Open Banking/PSD2 be an instant success or do these things take time?

Rishi Khosla: We can already see that Fintechs and other non-banks are emerging and gaining market share from large incumbents but I doubt that there’ll have been a huge market shift one year from now. What’s much more likely to happen is that as more non-banks and companies without a banking licence enter the sector, more consumers and corporates will begin switching to them as overall trust in their ability to manage their banking data will increase. This is a process that is likely to take shape over the next few years and I imagine by 2020/21, things will look very different.

About me: Freelance journalist specialising in FinTech, banking technology and retail technology. Former Editor of FStech, Retail Systems and IBS Journal. Further info here.


The FinTech news/views that caught my eye this week

FinTech startup Prodigy Finance lands $240m funding led by Index Ventures to expand post-graduate loans


Twitter backer IVP in talks to buy stake in £1bn TransferWise

N26 now has 500,000 customers for its bank of the future

UK banks abandon High Street: Ten branches shut every week

Dubai-based FinTech NOW Money raises $700,000 from US-based VCs

Starling: The app-only bank disrupting the industry with its gender balance

Monzo CEO on why challenger banks are now getting to the business end of a game of poker

Ezetap raises $16 million in funding round led by JS Capital

Oh, this is getting silly now. Barclaycard trials self-service ice cream van

About me: Freelance journalist specialising in FinTech, banking technology and retail technology. Former Editor of FStech, Retail Systems and IBS Journal. Further info here.


Interview: Carlos Abarca, Chief Information Officer, TSB

Carlos Abarca, Chief Information Officer, TSB tells Scott Thompson about the bank’s migration to the new Proteo4UK IT platform, the launch of its new mobile app and straddling the digital and physical banking divide


Your new mobile app is the first new service built by the Proteo IT platform. Could you tell us about the decision to build the platform following the Sabadell acquisition and benefits that are coming from it?

Carlos Abarca: We are building a bank for the 21st century, with digital at its heart. As part of that, we are migrating to our new Proteo4UK IT platform, which will not only liberate TSB from our current legacy systems but also make us more agile. This will accelerate our ability to make banking better for all UK consumers and provide opportunities for us to become more innovative in responding to our customers’ evolving banking requirements.

Put simply, we will be a digital business that just happens to be a bank. The decision to develop the Proteo4UK platform for TSB was simple. The Sabadell Group’s Proteo platform is more modern and digital friendly than our current legacy systems and provides a unique opportunity for us.

Customers have already had their first opportunity to experience the new platform through the launch of TSB’s new mobile app earlier this year. We collaborated with customers, design agencies and TSB Partners to design the app, and we’ve been making regular tweaks to it since launch, which demonstrates our ability to react quickly and effectively to our customers’ feedback.

The new platform will also reduce TSB’s costs considerably; with the contractual increase of more than £100 million in outsourcing fees that we’re paying to Lloyds Banking Group this year being reversed in future years.

Separating large, complex banking systems is no easy task. What have been the key challenges and issues and how were they overcome?

CA: Migrating IT systems is always a challenge and preparation is the key to success, together with people.

We have the experts in our corner; we know what we’re doing and we have the right people for the job. For example, we’ve had more than 200 TSB Partners working on migration since 2016 and around 800 software engineers working on building the new banking platform. We’re using 70,000 different test cases to make sure everything works as it should. Building and testing our new banking platform will take around two million hours of effort – that’s equivalent to 1,200 years for one person.

We’re making great progress so far; we’ve built Proteo4UK, kicked off training, opened our first account, installed our first new ATMs, processed our first Faster Payment and started to roll-out new IT equipment to our branches and offices.

What would be your advice to other banks looking to go down this route?

CA: Digital is not just about technology. It’s more about having the right culture and mindset, such as being agile and collaborative. For example, we collaborated with customers, agencies and TSB Partners on the development of our mobile app to make it better.

Furthermore, having a strong central team and making use of the best subject matter experts around you is really important. You also need high planning capabilities, to prepare a phased approach for migration so that you can prove that each new stage is fit for purpose before you cut the rope.

Going back to the mobile app, what are the key features and what has been the customer reaction thus far?

CA: Customer feedback about the first version of our mobile app has been really useful for us. Our mentality is one of constant improvement, with customers’ feedback at its heart. What this means is that we’ve been making regular tweaks to our app and the updates have been based on what our customers tell us they like or would like us to do better. In the digital era, being able to listen to customers’ feedback and using it to design future versions, adapting and improving quickly, is the only way to satisfy our customers’ needs.

In terms of the key features, the new app is much improved on its predecessor and has a more user-friendly interface. Day-to-day banking is simplified with fingerprint login for enhanced ID security, the inclusion of the available balance checker, a currency converter for holiday money, a tool that enables you to book mortgage appointments, and improvement to make it easier to manage standing orders and direct debits.

And as I mentioned earlier, we’re making regular tweaks so, for example, customers will soon be able to request overdrafts or eSavings at just one click.

The mobile app will in future integrate with third party apps and services from FinTech startups, with the aim for it to become truly integrated with customers’ digital lifestyle. Could you tell us more about this?

CA: We’re working hard on this, but I can’t tell you much at the moment. However, what I can say is that we will collaborate with our shareholder Sabadell Group, with the FinTech environment, and with some well known partners such as Samsung.  Stay tuned to your screens.

Many of your challenger rivals are digital-only ventures, but you promote great face-to-face service combined with state-of-the-art digital banking. Is this the best model going forward or will branches eventually die out, as many industry observers are predicting?

CA: Digital brings enormous benefits to banking, but there are also times when only face-to-face will do. That’s why TSB is part way through a multi-million pound investment programme in branch and digital banking services, helping customers get the best of both worlds; great face-to-face service combined with digital banking. The way people bank is changing fast and our investment programme is about getting the balance right.

In just two years, we have completed over 150 branch refits and refurbishments and nearly 40 branches have received six-figure upgrades. In addition, at the end of last year we opened brand new flagship branches in Aberdeen and Birmingham.

This balanced approach offering customers the choice of face-to-face or digital is working well. TSB was named Britain’s most recommended High Street bank in 2016 (benchmark study, covering all major banks, conducted by BDRC Continental; sample 15,000 UK consumers, November 2016) and recognised as the best High Street bank for service by Which?

What can we expect to see next from the Proteo platform?

CA: We’re completely focused on migrating to our new IT system at the moment. Lots of milestones have already been completed, with many more to come. Some things that are happening are more visible to customers, such as the mobile app and from now on through to the end of the year, we’ll update the mobile app at least a couple more times. Other milestones are about making sure everything runs smoothly in the background.

Another thing coming up is the introduction of a new Mortgage Sales and Originations (MSO) system, which will provide us with market-leading sales and originations functionality, enabling us to provide a differentiated level of service. The software will be ready to roll-out to our mortgage intermediary team later this summer, followed by a phased roll-out to our direct channels. This will allow our service to brokers – and subsequently to our own customers – to be so much faster.

About me: Freelance journalist specialising in FinTech, banking technology and retail technology. Former Editor of FStech, Retail Systems and IBS Journal. Further info here.