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Simon Wilson, Co-Head, Payments at Icon Solutions


For several decades, incumbent banks have held a comfortable leadership position in payments. But the rapid growth of digital payments has signalled opportunity for new market entrants to attack this status quo.

To develop effective strategies to stay ahead, incumbents must understand who their competitors are now, and assess how their strengths and weaknesses compare in the key competitive battlegrounds of data, trust, cost, innovation, scale and alternative payment methods.


Who are incumbent banks competing against?

Incumbents are facing increasing competition from card networks, payment platforms, challenger banks and big tech players, which is upending the payments ecosystem.

Incumbent banks’ market position is underpinned by strong consumer trust and massive scale, but these historic advantages can no longer be taken for granted.

            Simon Wilson

Take trust. This is a layered concept, ranging from transactions being reliably processed, responsible data use and, increasingly, an expectation that organisations are acting in their customers long-term interests. And demographic trends are showing that consumers increasingly trust non-bank and alternative providers to deliver financial services.

A recent Oracle digital banking survey focused almost exclusively on Gen Z and Millennial customers showed that 64% would recommend their bank for various spending, savings, borrowing, and investing products, but 56% said they would be willing to switch to banking solutions offered by one of the big tech companies. And at the end of 2020, 15% of Gen Z and millennial consumers considered their ‘primary’ account to be with a challenger, up from 4% at the start of the year.

Elsewhere, banks are sitting on a goldmine of customer data but must start using it more effectively to gain an advantage. In itself, data has no real value, so it is the ability to effectively organise, translate and leverage this data as meaningful customer insight and value add products and services that has emerged as a key competitive differentiator.

Legacy infrastructure also makes it difficult for banks to compete on cost, which is more important than ever as margins evaporate, and payments become instant, invisible and free. This hampers the ability to realise partnerships to drive innovation and limits the opportunity to explore alternative payment methods.

And as incumbents look to bolster their strengths and address these challenges, they must also recognise the areas where the competition excel.


Card networks – moving beyond ‘just’ cards

Card payments are trusted by millions of consumers and businesses worldwide, with card networks managing massive volumes to realise huge scale advantages. This is combined with recent mergers and acquisitions to support end-to-end payment services and multi-rail offerings. Take Visa’s Crypto APIs, for example, which enable banking clients to access and integrate crypto features more easily and demonstrates the innovation that is happening in this sector. Mastercard has also confirmed it will enable crypto flow across its network in the near future.


Payment platforms – creating ecosystems

As the payment ecosystem has expanded and digital volumes have increased, organisations like PayPal, Stripe and Square have evolved from single specialised propositions into comprehensive payments platform businesses, providing previously bank-led offerings such as SME lending, corporate treasury services and credit.

Payment platforms are effective at managing high volumes and have the capacity to scale and drive innovation in specific market segments. Platforms are fast to adopt new payment methods such as digital currencies, and their use of data is improving consistently, offering some personalisation to customers.


Challenger banks – the new(ish) kids on the block

Challenger banks can best be described as banks without the baggage, unburdened by 50-year-old legacy infrastructure, sprawling bureaucracies and siloed departments.

Challengers have built market momentum and presence through their reputation for customer-centric products and services, having made consumer behaviour and experience their focus. Revolut for example offer in app investment in stocks, crypto and commodities, as well as vaults allowing you to save money in any currency or commodity.

Challengers also benefit from a low-cost infrastructure to bring products to market quickly, and have been more willing to explore alternative payments than traditional institutions. Again, take Revolut for example, who offer free and instant transfers in 28+ currencies, crypto and commodities. AndFirst Boulevard neobank will be among the first to pilot Visa’s Cryto APIs to enable their customers to buy and sell bitcoin through their digital accounts.


Big tech – the wild card entrants

The big tech GAFA (Google, Apple, Facebook, Amazon) players are the ‘wild card’ entrants that represent potentially the greatest competitive threat to incumbent banks. One look at China, where Tencent and Alibaba have established dominant positions and massive payment volumes through WeChat and AliPay, is enough to keep bank executives up at night.

Big tech enjoy massive scale but, so far, have been content with relatively limited plays, such as overlaying services through their mobile wallet platforms or partnering with financial institutions on limited offerings. We can expect continued investments and acquisitions to support data-driven, experiential products and services.

A potential roadblock is that regulation will make it difficult for big tech to undercut the competition by subsidising services below cost. Regulators have also shown their teeth in blocking Facebook’s considerable crypto ambitions, forcing a rebrand from Libra to Diem.


How can banks compete in payments?

It is clear that incumbent banks are under significant and sustained attack from various competitors and the reality is, this competition is only going to intensify. As J.P. Morgan CEO Jamie Dimon notes, incumbent banks should “expect to see very, very tough, brutal competition in the next 10 years.” When asked why JP Morgan intended to focus on buying FinTech and tech firms, Dimon noted, “our new competition is Apple, Amazon, Google, WeChat and AliPay” – rather than other banks.”

Incumbents must therefore focus on combining a clear, executable strategy with flexible technology solutions and expert partners to improve data-driven propositions, promote trust, reduce costs, realise scale advantages, drive innovation and support alternative payment methods.



Bringing Automation to Banking




Ron Benegbi, Founder & CEO, Uplinq Financial Technologies


Automation is everywhere you look these days; from supermarkets to warehouses to automobiles. This prominent trend shows no sign of abating anytime soon. However, some sectors remain behind others when it comes to adopting automated technologies. Banking is one such segment, but there’s now evidence to suggest that this could be about to change.


What do we mean by automation?

There are a lot of ways to define automation, but broadly the term applies to any technological application where human input is minimized through design. Over the years, automation has evolved from a basic level, which took simple tasks and automated them, all the way to advanced automation powered by Artificial Intelligence (AI). In general, automated solutions work to increase productivity and efficiency within businesses and often result in a reduction in costs associated with human capital.


Ron Benegbi

Why has the banking sector been slow to adopt automation?

The banking sector has been built on a number of long-standing, tried and tested processes and protocols, which have been continually fortified and refined over time. This is one explanation as to why the sector has been so slow in adopting new, automated methods within its operations. Additionally, many major financial institutions have spent decades building their own internal legacy computer systems, which are often incompatible with modern automated solutions.

When combined, these two issues have caused a significant lag in the banking sector with regards to the adoption of automated technologies. This lag has created a market opportunity that a number of fintech providers have been able to exploit in recent years. Offering a more responsive and tech-first user experience, many fintech providers are leveraging the power of automation to better meet the banking needs of their customers. However, there is still time for the banking sector to start bridging this gap.


Does automation have a place in the banking sector?

The opportunity for automation to play a role within banking can be transformational.

To achieve this, it’s important that legacy organizations begin to learn from their more tech-savvy, smaller counterparts. If used effectively, automated financial solutions can greatly improve the experience of banking customers, both on a personal and business level. So, what exactly does this change look like, and how far away are we from seeing it become a reality?

A good place to start is the small business credit lending process, where not much has changed since the 1980’s. Over that period, the world has greatly transformed, but the methods used to assess credit worthiness have remained somewhat static. For the most part, banks assess data related to businesses’ accounting and banking records and from credit scores. For many businesses, especially the newer and less established ones, this antiquated approach is having a detrimental effect. In fact, it’s often cited as a contributor to the huge funding gap between SMBs and their larger counterparts.


How can automation benefit the banking sector?

By adopting more automated technologies, lenders in the banking sector can begin to assess more comprehensive information when making credit decisions. Notably, new methods exist, which enable additional data sets to be evaluated, in order to build a more accurate financial depiction of a business’ overall position. This data can come from sources like external market attributes, economic indicators, demographic data and exogenous shocks.

By leveraging additional data sets through new methods of financial automation, banks are now in a position to respond more effectively to small businesses, including those in emerging and evolving markets where there is a lack of conventional sources of information.

With more ways to access funding, facilitated by alternative data and automated processes, small business owners can improve their operational efficiencies and accelerate their growth efforts. In doing so, legacy oriented financial institutions can now better equip themselves in protecting against new, nimbler tech-based disruptors.


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Nigel Abbott, Regional Director North EMEA, GitHub


There is no denying the financial services (FS) industry is under pressure to innovate. Not only have customer and consumer expectations for digital experiences surged in recent years, but the emergence of nimble and ambitious fintechs have disrupted the market. Yet, despite striving for innovation being table stakes across the industry, FS organisations inevitably face familiar hurdles that slow their progress, including concerns surrounding security, compliance, and the ability to act fast.

Open source is increasingly seen as a route to drive innovation and create new value. The FS sector’s utilisation of open source and the transformative role it can play is accelerating – on paper, at least. According to the recent Fintech Open Source Foundation’s (FINOS) 2021 State of Open Source in Financial Services survey, as many as 80 percent of FS leaders said that innovation, reduced time-to-market and total cost of ownership are factors for FS businesses to consume open source.

Nigel Abbott, Regional Director North EMEA -GitHub

But the reality is these positive adoption figures don’t tell the whole story. The survey also revealed that 75 percent of FS technology leaders said their businesses are either not “open source first”, or that they did not know if they were. Tellingly, less than one in ten (eight per cent) said that their business has put in place policies to encourage open source contribution.

The statistics point towards disparity between uptake of open source and the ability to use it to its full potential. But why?

For me, it comes down to some common myths about the role of open source that need demystifying:


Myth #1: There are limits to the innovation that open source can deliver

This could not be further from the truth. All enterprises, including FS companies, rely on open source software to build the best software for their customers, improve infrastructure, and unlock the potential of their engineering teams. Nationwide, for example, has completely redesigned its DevOps processes to respond faster to market changes and keep pace with customer expectations to remain relevant. The impact is transformative when they actively embrace it and participate fully in the open source community, creating a win-win situation for end-users. 


Myth #2: Data can be shared without consent 

Quite the opposite. Open source does not require FS businesses to share all their secrets and give away their competitive advantage. Instead, taking an “innersource” approach allows financial institutions to take the skills of developers who are accustomed to using open source tools and brings these inside the company firewall, providing a secure internal platform for working collaboratively on projects.


Myth #3: Open source is not secure

The most common misconception is that higher security risks are associated with code being openly available to anyone who uses it. But the open concept is, in fact, one of the biggest security strengths of open source. This is because of the collaborative nature of how code is built. The open source community has a shared responsibility for developing and maintaining secure code, and there is a vast global pool of developers identifying and fixing security issues. Supported by the right tools and processes, open source makes it easier for developers to code securely throughout the entire software development lifecycle, reducing the amount of time and financial investment in delivering secure products. Research from Red Hat found that security is regarded as a top benefit for enterprises using open source.


Myth #4: The open source community lacks finance sector contributors

This is untrue. Financial enterprises of all shapes and sizes are prominent participants in the open-source community and lead by example, sharing meaningful code contributions. Challenger banks and institutions such as Goldman Sachs contribute to open source initiatives via FINOS. By opening their code and ideas, FS companies can share lessons and support the whole community – helping them deliver better services and more value to their customers. And crucially, they are advancing a community that they can systematically tap into and benefit from.

Open source is already delivering innovation in the FS sector. But the bottom line is that there is so much extra value it can bring. Unlocking the full potential of open source to effect change does not just require buying DevOps tools. Open source requires organisation-wide understanding and support, a culture of collaboration and a progressive DevOps and governance process to thrive. Only then can it deliver its true value and accelerate innovation.


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