Introducing Reinventing Banking, a special series of The Slant Podcast brought to you by Bank Director and Microsoft!
This inaugural episode features Neil Blagden, the chief operating officer of one of the world’s largest fintech companies, Finastra. Finastra enables the financial services world to deliver the future of banking through applications that power financial institutions, marketplaces that accelerate industry and an open innovation platform for banks, fintechs and non-banks to connect and collaborate. They are leading the way in which applications are written, deployed and consumed in financial services to evolve with the changing needs of customers.
In this episode, Neil talks about where banks should start when transforming their institution and shares a case study of a regional bank that partnered with Finastra. He reviews some of the key barriers he has seen as banks implement new technologies, such as legacy tech debt, the challenges of innovation while balancing regulation and security and the skills and capabilities of a bank’s talent. In addition, he shares how a culture of micro improvements and digitization, along with the focus on banking as a service, work together to improve a bank’s customer experience.
Edited for readability.
Welcome to Reinventing Banking. A special series of The Slant Podcast brought to you by Bank Director. This 12 part series, sponsored by Microsoft, focuses on innovative companies and thought leaders in the financial technology space.
LAURA SCHIELD: I’m Laura Schield, the chief operating officer with Bank Director and FinXTech. In this episode of Reinventing Banking, I speak with Neil Blagden, a fellow chief operating officer who’s with Finastra, a technology company, providing software and resources to financial services companies throughout the world.
Neil talks about where banks should start when transforming their institution and shares a case study of a regional bank that partnered with Finastra. He reviews some of the key barriers he has seen as banks implement new technologies, such as legacy tech debt, the challenges of innovation while balancing regulation and security and the skills and capabilities of a bank’s talent.
He shares how a culture of micro improvements and digitization, along with the focus on banking as a service work together to improve a bank’s customer experience. Here’s the conversation.
All right, Neil. Well, welcome to this special series of The Slant Podcast, Reinventing Banking presented by both Bank Director and Microsoft. So let’s get started by you telling us a little bit about yourself.
NEIL BLAGDEN: Thank you, Laura. Delighted to be here and thank you to both of you as well. So, yeah, my name’s Neil Blagdon, I’m currently the chief operating officer at Finastra. Been there just over two and a half years. And I look after two sort of main responsibilities: one of our Commercial business units, which is both software and services out to our financial institution clients, and then also our centers of excellence that go from go-to-market, right the way across to services, support, and also our technology division as well. So, upon joining Finastra, I joined as their chief customer officer.
And the reason why is our CEO at the time thought very strongly about “how do we bring Customer into not only what we do, but also how we support and enable our clients as well as we go forward.” Prior to that, was with Vodafone here in Europe, some general insurance companies, and then also an earlier part of my career in consulting as well, but delighted to be here.
LAURA SCHIELD: Absolutely. Well, thank you so much. And you’re based out of London right now. That is correct?
NEIL BLAGDEN: Yes.
LAURA SCHIELD: Okay. Well, wonderful. Well, tell me a little bit about Finastra from what I can tell, it looks like a traditional core, like a Jack Henry or an FIS or Fiserv, but what sets you apart? And just tell us a little bit about Finastra itself.
NEIL BLAGDEN: Yeah, sure. No problem. Finastra’s one of the, it’s the third largest fintech. Obviously we focus solely on providing software and services into financial institutions, including banks all over the world. We’re a best of breed software company and services alongside that. We operate in a 154 countries, including the US, which is one of our major markets. And we have just over, around about 8,000 clients that we serve in all of those countries. Our products mainly center around lending payments, what we call capital markets, core banking and sort of core digital banking that consumers would see every single day. In terms of differentiation versus some of those other names that you mentioned? Really think it’s, I suppose, the depth and breadth of our portfolio to start with. We span all of those sort of core verticals that financial institutions are really interested in. I’d have to say we’re very much a champion of what we would call open banking.
We declared many, many years ago, about four years ago, now that the future of banking was open. And what did that really mean was ultimately that it was about transparency, simplicity of experience, open capability, open APIs, etc. And we’ve been leading the charge, in our view, over the last number of years. Strong performer in both platform and banking as a service, which is absolutely the future, for both the software, but also the financial institution side of it.
And then we’re very proud to be what we call, I suppose, a link to the open debate around open by default, which is really about the culture, and very much striving to be one of the most loved and inclusive sort of fintech brands as well out there. And in short, maybe we’re just a bit cooler.
LAURA SCHIELD: There you go. I like that. That’s perfect. So let’s pivot right there for just a minute and talk about maybe one of your case studies. So let’s give our audience a little bit of taste of what you’ve done for maybe a US bank client here to make them more efficient, faster, stronger etc.
NEIL BLAGDEN: Yeah. No, absolutely happy to start.
I won’t be able to name their name, but needless to say, I’ll give you as much information as I can. They’re a mid-tier US bank, on the self end of the community banking market sort of size. Broadly around about a billion under sort of assets under management, just to give our listeners a size. As an organization they’ve been working with us over the last number of years. They’ve been sort of consuming some of our core software products, particularly around sort of core banking, which is our Phoenix product, or our lending product, which is Loan IQ.
They’re much more of a regional bank. And ultimately the problem statement they came to us with was, “How can we get across the US? How can we grow at scale? And ultimately we don’t have huge amounts of capital in order to do that.” So the way that we’ve helped them think about ultimately is,how do we take the lending product, the core software, and create a banking as a service proposition, whereby they’re leveraging fintechs, our platform and other technologies to ultimately create their reach across the US. They still use their same license where they’re based and ultimately they’re able to then trade and drive and shoot for additional customers and growth across that piece.
So we’ve helped them ultimately through our bankings and service platform, and what we call API. So it’s effectively an integration technology that has allowed them to integrate their core services through our platform to reach end consumers through various different routes to market. They’re one in my view, and one of the early adopters of real banking as a service and using partnerships to sort of gain scale, and ultimately they’ve had to drive no additional licensing regulation and so on, but, but are really sort of striving forward. So we we’re very excited for the potential there.
LAURA SCHIELD: So questions about that. So what made them come to you? What made them choose Finastra over others? And then my second question is, are they just using you as their core or, or do they still have their existing regular core still there?
NEIL BLAGDEN: Yeah, no problem. I’ll start with the, the latter, the core – why they use Finastra, the Phoenix core. And, obviously, they then use our Loan IQ product as well. So we keep it simple that way, in terms of why they came to us. Ultimately, when we started out on our sort of platform journey, two, three years back, it was very key that we find sort of forward thinking not only financial institutions, so banks themselves, but also other vendors that might be roots to market in that sort of ecosystem. And effectively we become an enabler for it. So we’re one of the leading in that space. We’ve got great credentials already. And ultimately, this particular bank were very keen on what they’d seen us do already.
They were willing to innovate. They were willing to test and learn and, and ultimately then built that relationship into a banking as a service relationship rather than pure software.
LAURA SCHIELD: So from an implementation from the time they decided to make the decision until it was actually implemented, what was that timeframe and what things did you all go through during that? The challenges, the barriers, etc.
NEIL BLAGDEN: Yeah, sure, absolutely. I think, probably treat the timeframe in two ways, because ultimately there were the two core sort of software products. So the lending and the core banking system. So those were more traditional implementations just given their scale, and they were done a number of years prior in terms of enabling the banking as a service sort of capability with that connectivity.
I think from inception of idea through to live in market, it was no more than sort of nine months, basically from top to bottom. And that obviously includes inception. Since casing and then getting to a point of starting the program. You mentioned barriers obviously as well. Barriers on this particular program or sort of barrier to organizations stepping forward and so on?
LAURA SCHIELD: I think both certainly the barriers to utilizing you as their new core and moving from I’m assuming from a legacy core to you. That’s correct?
NEIL BLAGDEN: Yes. So they moved from a legacy core and upgraded there. It was a key requirement ultimately to be in a more modern, not only infrastructure, but also a more modern software as well.
So yes, there are certain prerequisites on these journeys. It’s not impossible to link with more legacy cores, absolutely. We have some growing examples, but really when we find a company that’s wanting to embrace banking as a service, they’re typically on quite a transformation journey on all of their software and infrastructure and associated connectivity that goes between. With this one, the real barriers were they were very much an early adopter, and it was really centered around the business case that designed the trust in the go to market, the prediction or the potential in terms of sort of seeking new customers. So on their side, that was an element that obviously sort of took several iterations, and so on, to get to a point of belief and board approval. From our perspective, then ultimately it was about sort of testing some of the connectivity, and building some of the API connectivity as well as we went.
But ultimately a lot of our products were already fully API connected and it was really about then trying to plum, I suppose, or connect that into their existing ecosystem as well. So the barriers on this one, not too, too major. If I roll it back out and think more across the market and ultimately, typically what banks are struggling with today, certainly when they’re grappling with how do they get more out of what they’ve got, or certainly with less capital expenditure and particularly in this current economic climate. And that’s the same for whether it’s a tier zero bank or right the way down to tier five banks, everybody’s got a certain amount that they can spend.
So it’s kind of five things that typically come to my mind that we see with our clients. One is the whole legacy technology, or “tech debt” as we would call it. Lots of organizations that have been around for a long time. Some even, well before even computers were even envisaged, have certainly built complicated processes, a multitude of different softwares, either vendor led or through their own sort of in-house IT teams. And they’ve connected those together over years. And, ultimately, that is quite a spaghetti that needs to be thought about carefully, unpicked. And then ultimately, how do you take it to a modernization agenda? Doing it all in one go is never the right answer. It’s too complicated, too costly. So it’s about breaking it down.
Second area is really the challenge between innovation versus regulation and security. And how can you innovate at pace at scale whilst, ultimately maintaining your license to operate in effect. And, and often we see it stifle certain banks. We see a number of other banks being creative, creating spinouts, building the innovation there. And then when it’s ready and tested, then bringing it back into sort of the main bank, so to speak.
So there’s a number of ways to, to tackle that skills and capability, the war on talent. I don’t like the word, but effectively, and particularly in our software engineering spaces, machine learning, skills, analytics, engineering skills – those aren’t really challenging to get at scale. So it’s always that combination of finding them in the external market and then growing your own, which obviously certain organizations of scale can do, others then have to turn to partners, and so on.
Speeding culture for change. I always put that one down. A lot of our banking clients are big: “I’ve got certain ways of doing things. I’ve got certain client relationships,” and so on, and it’s always that balance of “How quickly can we go? How quickly can not only an internal user adopt it, but also an end customer get used to the new process, the new end to end experience,” whatever it be.
And then finally, the word I really don’t like is a word called omnichannel, but it does actually describe what clients are trying to do. And banks are really trying to do, certainly with other industries much further ahead as well, potentially. And it’s really, how do you connect? In this instance, a retail branch, a telephony channel and a digital channel, and actually make them seamless that you can move between.
And we often find that as a particular challenge, some organizations get it invariably only on singular sort of end to end experiences as well. So those are some of the barriers, hopefully that helps.
LAURA SCHIELD: Absolutely. Definitely. So you spoke about going after lending for the area that they chose that being their first thing that they wanted to focus on. So how did they go about choosing that specific area, or were you even involved in that process?
NEIL BLAGDEN: No, that’s much more of the financial institution’s (or the bank’s) decision making process of where do they see their growth or protection coming from. Let’s put it that way. But ultimately this was a growth story.
And lending is a key area. They’re an organization that tends to deal with sort of mid- to higher net worth individuals. And what they were looking to do was obviously expand that and that type of persona or segment of their customer base is obviously a strong user of sort of lending based products. So that was really their ultimate decision. We know that they’re now considering extending those bankings to service offerings into other disciplines, including payments and beyond the core banking as well.
LAURA SCHIELD: So we talked about–this really leads right into this next piece, about customer experience–we talked about customers wanting to experience better, faster, efficient, more interesting pieces to work with their banking. But not everything is one size fits all. So how does a bank identify what is best for their bank specifically as they jump into this and what’s best for their customers?
NEIL BLAGDEN: Yeah, that’s a great question. I think your commentary on one size fits all is spot on. I would really agree with that. There is no singular approach for me. There are a number of core things that I would heavily encourage others to think about. And this is not a new field. This has been around for many years, but ultimately it’s about making it simple and accessible.
So for me, CX, it’s gotta be continuous. It’s got to be end to end. And it also has to be persona led and many organizations, many banks in the US, whatever size, have different personas. I.E., different types of customer segments. And therefore, there are slightly differing needs and you need to be able to understand them, therefore, you can then cater to them.
So for me, I have a simple mantra. I don’t think it’s rocket science in any way, but it’s really sort of what I would class sort of listen, correlate, and you make a change and then you check that change to ultimately see that you’re making an improvement. And for me, the listening really is data driven.
You’ve gotta be at every single touchpoint with your customer, whether it’s a branch, whether it’s a telephony channel, even the digital channels as well. And you’ve gotta be listening for what’s good, bad, or, or not working at all. You then gotta connect, in my view, the customer experience, feedback, and verbatims to operational.
It’s important because when you come to change something, you need to be able to check that it’s made a change and you can only do that with operational metrics or KPIs. So if you can change those, and you can see that change driving something up in the right direction, then logically, if they’re connected to the customer experience at a certain point, they will then drive that up as well.
So that’s how I would sort of, I suppose, encourage organizations to continue to think about it, but it’s gotta be simple, it’s gotta be meaningful. There’s always a way I think about it: do not try and boil it as one big program and try and change everything. I’m a big fan of that sort of micro improvements, tackle things, keep tackling things and almost have a relentless fix relentless improve mentality as you drive your change forward.
LAURA SCHIELD: I love that. “Listen, correlate and check that change” being the mantra with focusing on micro improvements. That’s wonderful, thank you. So, knowing that a bank has limited resources, limited talent, limited dollars – making that significant difference, how does a bank really focus on that? I know you talked about these pieces, but where do they start? I think that’s one of the biggest challenges that a bank faces is where they know they need to do something, but where do they start?
NEIL BLAGDEN: A great question, really is. And I think you’ve gotta start with the customer first, and that that’s a given.
So I think the question we’ve just covered and so on around your experience and how do you understand it? How are you listening? If you’re not listening, you’re not understanding and therefore you can’t make the right changes or, or make the best changes. So I think that’s critical and I think, you know, you don’t need to overspend in the environment, and most organizations can do this modestly. You can use third parties, you can obviously use your own capabilities. And obviously there’s a lot of digital technologies to allow you to do it in quite a seamless fashion as well, with a good experience for the end end customer. So it’s that insight to be able to make change or drive change.
I think the other one for me is–and this is what every CEO at every bank and every organization grapples with–I would heavily encourage whatever your USP is, focus and invest and invest there where it’s, where it’s a commodity and those elements look to partner. Look to fintech, look to others to provide those services for you at a cheaper cost rate, and ultimately sometimes on more modern technologies and therefore faster technologies that can ultimately allow you to move with the market.
Future skills, depending on your size, everybody’s facing that challenge. Obviously if you’re a larger organization, in theory, you can have larger budgets as well. But the point being is, how do you do that in a smart way? You need to be out in the market. Yes, you need to look for good talent, but equally really encouraging people like we are in our own place is growing your own.
You’ve gotta go and find those things, those apprenticeship programs, whatever it be, try and build those engineering skills that will be bigger and better for you as the organization grows. Another trick. I always like to say you stand there and you look at your infrastructure, how you build things, you know, how do I create an analytics environment?
Look at your vendors, or go and choose vendors that can help. So if you take Microsoft, for instance, obviously sponsoring today, which is great. If you look at Azure, a wonderful product, huge opportunity to put things in the cloud, but what people don’t often fully consider is a lot of the ancillary add-ons around as Azure are absolutely great. And often bundled free within the price. Analytics, capabilities, reporting capabilities, machine learning capabilities. You can start to use that. Obviously you need to cover that with the skills to be able to execute them. But I would heavily, I always talk about vendor.
Add-ons, go and grab those, utilize those, etc. The other piece and final piece probably for me is really around leverage fintech, whether you’re a small community bank in the US, there are hungry organizations out there that are providing software capabilities that are willing to partner. And they’re looking for good partners ultimately to scale not only their offering, but also support the bank in their sort of owned growth ambitions as well.
And then probably finally outsourcing non-value. We’re seeing a lot of banks move that way now, even their on premise solutions. Can you, as a vendor, take the software back, host it for me, manage it for me, and so on. And that ultimately frees up capacity and investment dollars to focus on the innovation side, as opposed to the general day to day run.
LAURA SCHIELD: Excellent. So let’s pivot a little bit more to data. So, banks have a ton of data, and very few banks have really harnessed the ability to figure out how to use that data the best way. So what are your thoughts around that? How can banks use that data and really use it appropriately and cost effectively to gain more market share, to continue to grow?
NEIL BLAGDEN: Yes. They’re very fortunate. They have huge amounts of data, which is wonderful. And obviously in the appropriate way, you can really maximize that data to not only drive experience. But, the way I typically think about it is: these things can be quite daunting, especially for an organization that hasn’t necessarily thought about it, or doesn’t have a deep set of expertise, in data management, data architecture, all of those kinds of things that go with it.
So for me, it’s always gotta be use case driven and there are always three things I would heavily encourage any organization from a use case perspective. It would be revenue use cases, not a surprise. You know, it’s absolutely critical for an organization to grow, right? The operational efficiency side. So how you as an organization improve what you do day to day, and then ultimately, especially with banks, risk management, how do you use predictive capabilities to try and spot risk in your portfolio? Customer basics, etc. So that’s kind of my first sort of tip and recommendation is really, use case.
Second one really is you need to start early with the architecture, and what do I mean by that? I don’t mean spending millions and millions of dollars and all of those kinds of things. What I really mean is being choiceful, because you will have the data in your business, but invariably it can be extremely difficult to find it and then piece it together and then create meaningful insights that go across different areas within your business, whether it’s sales, operations, finance, HR, whatever it be. So I would start very carefully and take advice. There are plenty of good vendors out there. Obviously grow your own skillset, But really, think about what is the architecture you want to embed? What are the rules, the standards, the governance, all of those kinds of key things. Because when you’re dealing with data, especially in such a hyper regulated area, the regulators are gonna want to know that you’re doing it in a meaningful and careful fashion.
Other thoughts: utilize open banking. It’s a great opportunity in the UK and Europe. Been really, really strong. And most banks have really sort of latched onto that as providing great insight to drive different experiences and more seamless experiences between them. I come back always to “collaborate.” You probably say, Neil’s always gonna say that, but collaborate with fintechs. It doesn’t mean just buying software. What it means is, are there platforms out there that can provide you with multiple apps to get you up to speed and moving quicker, you can often invariably integrate them quicker as well. And you can then move quick.
Then my only other advice is, obviously machine learning is like many words, overused and over promised, overhyped. It’s absolutely the future. It’s absolutely critical to what you do, but I would always say be very, very choiceful in where you invest that time. It’s got to come back to those use cases of revenue, revenue, revenue, and then ultimately where it makes sense in risk and the operational side as well.
So those would be some tips for you.
LAURA SCHIELD: Let’s dive into the machine learning piece. Where have you seen that been effective and worked well at banks?
NEIL BLAGDEN: We use it extensively ourselves and we also use it in terms of creating and working with our own. We have our own fintech partners that we use and, and we bring them onto our fusionfabric.com platform.
Typically we’re inviting organizations that have got a strength in that machine learning space. You know, we have our own competence, but you’re never gonna have enough people to be able to build everything that your clients are looking for. So a great example that we see, in the maybe slightly less relevant for the community banking market space, but is around risk management in capital markets and so on.
There’s some great fintechs out there. Some that we partner with, some that are very much on our platform, and ultimately they’re using machine learning to analyze the bank’s data on the customers and the portfolio of customers trying to find opportunities and risk. It’s a great product of calling out that risk that they’re then able to manage that risk down through, I suppose, management intervention and so on. So that’s an example in the risk space and we continue to see them grow. We see a lot now emerging in the: How do you target customers? So how do I get an app from a particular vendor on a smaller fintech that’s using machine learning, it can then ingest your data. It can then help you with your targeting. It can tell you, you know, and ultimately your marketing messaging and those kinds of aspects. So there’s a whole range of opportunities, you’ve just gotta be mindful of what you’re trying to achieve with it. And I still come back to revenue ops and, and risk.
LAURA SCHIELD: So how do you choose fintech to be added to your platform?
NEIL BLAGDEN: We are choiceful. Absolutely. We will always invite people on where we think they’ve got real benefit to add to our portfolio of clients. And ultimately we also look to partner not only with our financial institutions and these fintechs themselves, but institutions, universities, think tanks, etc, those that are investing in research.
The key for us then in terms of choosing ultimately is, do we believe it’ll drive value? We’re always willing to test and try that. Cause some of these are, are not always fully tested, at scale. So again, there’s no harm in testing as long as they obviously combine and adhere with some of the standards that we offer.
And then ultimately it’s for our own sales force, and customer engagement teams to engage with our clients to understand what works, why it works. And ultimately, yes, we’ve had success today. The platform continues to grow we’re north of 200 apps now in that marketplace that, obviously, our clients can sort of pick and choose from.
LAURA SCHIELD: So are you also choosing the ones that a bank might say “I’d really like to work with this one, we’ll consider that one?” And are you considering ones that have not had any true financial services success yet?
NEIL BLAGDEN: We are. If the idea looks great, then we’re in, it’s not a problem. Let’s go test it. Why not? In terms of the banks, you’re absolutely right. They’ve got, certainly the large ones, even the smaller banks as well, they certainly have an idea of which way they want to go. They’ll have had regular contact with multiple different third parties themselves as well.
And they often sit there and go, “We love your core software piece, but we’d love that capability, right? We know you’re not doing it or it’s on your roadmap in two years time. Are you willing to bring that into the marketplace?” Absolutely. Any day.
LAURA SCHIELD: And so what makes a successful fintech on your platform?
NEIL BLAGDEN: To be honest, it’s gotta really crack that use case. Also I’ll come back to that in some way. It’s gotta be value. Add to the process of the financial institution. It’s gotta remove an overhead in their operation. It’s gotta reduce risk, or it’s gotta help them drive up their revenue.
And the ones that are doing that are making not only revenue share based arrangements and, or obviously, supporting that end financial institution to be successful. So, I may repeat myself a lot today, but it is those sort of three areas. Where can you add that value to a particular financial institution?
LAURA SCHIELD: No, it’s good. You are a global company, you’re seeing all kinds of things across the world, specifically in UK and Europe. So what are you seeing that could potentially come to US banks? What could be used by our financial institutions here in the US?
NEIL BLAGDEN: UK, Europe, and so on, you know, it’s, it’s a similar size continent let’s say in terms of populations and so on, but obviously, a lot more smaller countries and not one single system. The European Unions obviously sort of brought various things together, like open banking and that’s certainly been well embraced in Europe. And obviously the ability to access data and access data from other platforms, in the US, ultimately, wherever you can find those opportunities–it may not be financial institutions, it might be, big, consumer facing organizations and who you choose to partner with–and again, it’s how do you sort of cross fertilize data to be effective?
I think what it has driven over the last sort of five to 10 years or so, is a lot more seamless processes. I’m a UK user. I, I travel a lot and, and ultimately what I see certainly is the UK and a lot of European countries have digitized quicker and earlier. You can even argue that AsiaPac countries are probably even further ahead, certainly with a super app concept and so on. And how do you get seamlessly between different types of services? It’s led to a proliferation of fintechs. Those fintechs have either been neobank, which have obviously in my view,
been a good thing cause they push the more traditional banks to upgrade, to improve, to drive their experiences and so on. And that’s a good thing. Obviously we have those in the US, lots around insuretech, all of those kinds of things. And then a lot of people adding and taking that open banking data and creating services around credit scoring and those kinds of elements for, for end consumers.
I think I see it in the bigger banks, less so in the community space at the moment, is how you start to think about, “These are my software solutions that are delivering services. How do I do that in a more cost effective manner? How do I embrace cloud at scale?” Not the simple things that a lot of organizations, ourselves included, have started with is how do you do it at scale? How do you put your core banking system in an Azure, for instance, and that is a big decision. That’s the big undertaking as well. Absolutely achievable. And we have a lot of clients doing that already.
Other areas for me – my sense is, US banks tend to, you know, they partner clearly. But what I see in Europe is that partnership is slightly different. It’s more in an innovation sense and they’re more inclined to partner for innovative products or innovative reach to market. So again, I think there’s a challenge in an opportunity certainly there. Connected ecosystems, I think, is where that really comes to play, where you start to see the embedding of the bank in telcos within Europe or vice versa and those kinds of things.
So we’ll start to see more of that. And ultimately as you move to more super apps and so on, you can even see it with Uber, it’s not into pure financial services yet, but you start to see the plethora of services starting to play through. And some of the other bigger retailers, obviously as you know, and Apple moving into buy now, pay later and so on.
So they’re all starting to cross fertilize. So banks need to be really, really switched on in that space. Cloud, I’ve spoken about a lot today, so I won’t probably go over that. IT outsourcing, I think we’ve spoken about quite a bit as well. We’ve certainly seen a huge jump in that in the last sort of five years or so.
Then payments innovation. I think the US is well up there, absolutely. But I think in terms of the practical use of that population in the US being as familiar, comfortable with using digital payments methods and so on. Obviously COVID has massively accelerated that in all countries. And it’s very pleasing to see that happening.
So those are some observations, at least. My honest view is, both sides of the pond you can learn from each other. So why shouldn’t we?
LAURA SCHIELD: Very good point. You said earlier there are some differences, obviously between banks here and banks on the other side of the pond. So you mentioned innovation, but what other things are maybe US banks, not as advanced upon with regard to banks on the other side?
NEIL BLAGDEN: What I’ve seen in Europe particularly, is every–and the US has already started on this journey–is you start with your core banking. So your ATM, your banking card, your current, or your checking account, and so on. Those in my view are the everyday high touch point regularity, let us build an experience.
And the US is, you know, we’ve seen huge numbers of community banks really embrace that, particularly through the COVID. As well. They’re on a journey. I’d say they’re certainly behind the AsiaPac in some areas and behind a number of the UK and European banks as well. Where it’s gone now in Europe particularly, is how do you go beyond just what I would call the simpler end of the bankings piece? How do you move into more complicated forms of lending? So you’ve got standard loans, car loans, you’ve got mortgage, and we’ve seen a real extension of those digital journeys into the app. And those are using the same sign on information, validation through certain fintech partners being drawn into those ecosystems, and so much so, that you can now take out a mortgage end to end with certain banks, certainly in Europe. End to end completely, zero paperwork. And if there is anything to sign, it’s a digital signature as well. So it’s a really transformed experience and we’re starting to see that then spread into even more complicated forms of lending.
So I think the natural journey is you start with your core, certainly in the community market space, that absolutely started in the right place, and then it’s really about how do we move into some of our other higher value based products and how do we digitize those, but you’ve got to start somewhere. Absolutely.
LAURA SCHIELD: So, what does the future hold? Where are we going? What’s gonna happen next?
NEIL BLAGDEN: Great question. I think in simple, and maybe this is a cliche phrase, but COVID’s brought the future forward in the sense of digital. Absolutely. And really what it is now, is a fundamental root and branch unpicking of many financial institutions to digitize as much, and as deeply as you possibly can. That leads you to choices in the channels that you can then choose, you know, branches, etc. You know, the consequence of that, particularly in Europe, has been felt in the sense of retail branches closing dramatically. We’re likely to see that in the US as a result, it’s an inevitable outcome of it. Equally COVID has accelerated some of that as people have shifted and felt more comfortable with digital. So, digital, digital, digital–put it that way.
The second area for me really is the banking as a service. You’ve gotta be thinking about yourself as an organization. How do we target new areas of growth? Financial institutions are under attack from up, left, right. Other people in the value chain, other people that hold huge amounts of consumer data, whether it’s to your Apples, your Googles, whatever it be. All are moving into financial instrument spaces, some with no desire to be anywhere near holding banking or regulatory licenses.
And that’s absolutely fine. So what is the banking role in that future? Banking as a service is absolutely the next big thing. And we’re seeing some really thought provoking, far reaching organizations in the US and in Africa, Europe and AsiaPac, really starting to think carefully about how they start to provide something as a service.
Treasury as a service, financial foreign exchange as a service, cash as a service or core banking as a service. A lot of the big banks are getting in there early. And then as I spoke to that more community bank, right at the top of the call – they’re using it to scale their geographical reach.
You would argue many US community banks are in a similar vein of, “How do we scale leveraging our license and do it in a cost effective manner?” So it’s digital, and in all honesty, banking as a service will grow exponentially over the next couple of years with many, many new parties that are very familiar to the everyday consumer, like a Walmart, like a Google coming to play significantly in these spaces.
LAURA SCHIELD: So as we wrap up this conversation, some of the things I’m hearing from you, obviously, digital banking as a service, banks here need to be focused on those things. If they’re gonna continue to grow and they’re gonna continue to expand, that’s what they need. And then secondly, as you start on this journey of digital transformation, focusing on number one, the customer, focusing on your core, but then micro-improving. You said, listen, correlate and check the change, those sorts of things. What other things can you advise bankers as they start on this journey?
NEIL BLAGDEN: I think a lot of organizations will naturally be drawn to the go to market the front end. How do we drive that experience? How do we get more customers? Et cetera. As we spoke about some of those barriers, I would heavily, heavily encourage any CEO, any CFO (because they’re gonna need to be heavily engaged in this conversation), plus their technology leader, whether it’s a CIO CTO, whatever it be: you’ve got to make sure that you’re tackling the infrastructure because you can have the best front end if you possibly can, but if your back end core systems or the systems that create generate and complete those tasks are not up to scratch or are heavily human dependent, you are going to struggle to keep up with where you need to be.
So I think it’s a multipart problem statement. When you talk about digital transformation, it’s not just the front end and the user experience, it’s about that whole end to end experience. It’s the whole technology layer that sits underneath it. And then it allows you to revisit how you will operate as an organization, how you free up that sort of lower value activity in my view, and how you put that dollar that you were investing into people or process or whatever into the higher value elements that ultimately drive more value for your customers.
LAURA SCHIELD: Neil, outstanding, very interesting information for our attendees, our listeners, our audience. I certainly believe that you’ve given them a lot to think about and things to consider as they move forward. Anything else to add before we completely finish up?
NEIL BLAGDEN: No, just a word of thanks to you, Laura, Bank Director, and obviously Microsoft as well.
And, I wish everybody luck out there. And, if you ever wanna talk: LinkedIn or give me a shout. Absolutely happy to engage.
LAURA SCHIELD: Great. Thank you so much, Neil, for joining us. We certainly appreciate it.
NEIL BLAGDEN: It’s been a pleasure. Thank you.