DIY SOS: FIXING-UP THE FINANCIAL SERVICES HOUSE

By Edwin Abi, CMO, Modulr

 

It has been 11 years since the 2008 financial crisis. And in that time, the ‘financial services house’ has now finally been remodelled; welcome to newly installed marble countertops, wooden floors, and hot coral drapes. The guests are all pleased. But behind closed doors, the plumbing and wiring might not be quite up to scratch.

While there are now cheaper FX transfers, simpler mobile banking and colourful debit cards – even the banks have updated their apps UX – unfortunately, in remodelling the ‘financial services house’, fintech’s have missed the doorbell, the fire alarm, and the plumbing. The infrastructure the house is built on is integral to keep money and services flowing, but its foundations are shaky. 

But this is changing. The next wave of fintech innovation lies in continuing to improve everything the end consumer doesn’t see – KYC/ KYB processes, compliance monitoring, and payment infrastructure, among others. 

 

Installing the wiring 

That’s because for too long, the wiring has been neglected. And we can see this neglect in the simple process of opening a banking app or signing up for a new account. When customers log on to their  banking apps they are presented with a fast and slick IOS – easy to navigate and responsive. However, the truth about what goes on behind that isn’t so slick. In the case of KYC and KYB there are often still a lot of manual processes that need to be checked. This means there’s a mismatch between a digital first business, and a paper trail of spreadsheets, file uploads, and manual processes. 

A truly digital payments infrastructure means any back-end services will be supported by APIs and computers talking to each other. For example, when Revolut opens an account on the front-end, the customer is greeted with a new account page, but they might not be able to move any money until KYC is completed. At the back-end, the server then sends an API to Modulr which generates a sort code and account number straight away. There is no manual intervention needed at all. 

B2B banking might also have had a face lift on the outside, but it’s still a shell of a house behind closed doors. The problem is that in the short term no one has really solved how to onboard sophisticated companies automatically – those with multiple levels of management and large number of employees – with KYB and KYC measures in mind. 

 

Bringing in the contractors 

Maybe all that is needed is a good contractor to fit those wires, and make sure the doorbell and fire alarm are all working. But even though it’s tempting to say that you can fix something by collaborating with someone else, the reality might not be as easy. As much as a third-party vendor which specialises in payments, KYC, or payroll, for example, can be brought in, those making the decisions on the back-office end still need to understand exactly what these ‘contractors’ are actually doing. And there are a number of business courses on payroll, KYC and the likes, to help educate organisations.

But the real reason why these digital-first offerings will really win out in this remodeling contest is because they have the tech aspects sorted. Fintechs specialising in the pipes, for example, will help to dramatically reduce costs to serve, as well help to increase uptimes. So there is a real opportunity for players like Onfido (ID verification), Finastra (risk management) and Modulr (infrastructure) to become the leading fintech providers’ final piece of the puzzle to deliver an unbeatable customer experience – beautiful new drapes, and sufficient heating all through the house. 

This is the real promise of digital. FinTechs have built a beautiful home, and it’s now time to flick on those switches and make sure everything behind closed doors works seamlessly too.

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