2020: Rewriting digital strategy
At the beginning of 2020, it seemed that ‘digital transformation’ was going to be the dominant industry trend for fintech throughout the year. However, at the onset of Spring, this changed unprecedentedly for most of the world as the COVID-19 pandemic took hold. From that point onwards long-standing industry pain points could no longer be ignored: digital strategies had to reflect the new normal, fast.
“Simply put, the events of 2020 brought the future forward,” says Eli Rosner, Chief Product and Technology Officer, at Finastra. “Our capabilities and software platforms allowed us to act very quickly in March 2020, from accommodating remote working to supporting our customers with their own transition. Finastra delivered working solutions to the market in a matter of days, such as the Paycheck Protection Programme (PPP) in the US.”
Indeed, there is a general consensus that the lockdown period has driven a wholesale reappraisal of digital’s value in the race to provide better products and services. Companies in the finance space were forced to rely on technology in an incredibly compressed amount of time, and, in some cases, start approaching fundamental aspects of their business from totally new perspectives. Firat Koc, Chief Marketing Officer at challenger bank Papara, states that remaining fast and agile during the transition period and accommodating customers’ changing needs paid off significantly for his company. Offering cash back incentives and relief from financial pressures, “Papara managed to reach its end-of-year user and card holder targets three months earlier than expected. Papara now has 5.5 million users and adds over 300,000 more every month.”
Technology: Driving the change
When FinTech Magazine asked for perspectives on which key technologies had driven companies’ revised digital strategies, we received a diverse range of examples:
Big Data and data analytics: “The introduction of big data analytics and machine learning algorithms into our development cycle has improved customer segmentation and fraud detection and prevention,” says Koc. “Artificial intelligence (AI) for KYC (know your customer) purposes is another technology that has been used by centralised cryptocurrency markets for some time. However, it has not yet become widespread in the finance sector, yet.”
Microservices: Edgardo Savoy, Chief Technology Officer at TransferGo, told us, “At the heart of each operation is the customer experience. Every service or microservice that we design has the customer at its starting point and is anchored to the experience we want to deliver. This not only gives us flexibility but also allows us to develop new services and offerings at speed and in line with client needs.”
Open banking and automation: “Open Banking has offered an immediate remedy while preserving the level of due diligence required to process loans responsibly,” comments Simon Cureton, CEO of finance marketplace Funding Options. “Automated decision-making has also accelerated the lending process to a matter of minutes from application to approval. Currently, Funding Option’s record for ‘application to approval’ is just two minutes and 56 seconds.”
Cloud: “Finastra has a strategic, multi-year cloud agreement in place with Microsoft to help accelerate the digital transformation of financial services. Cloud is a key enabler in this regard and has helped our ability to deliver remotely too. Cloud technologies are also helping to drive our initiatives to deliver better outcomes for everyone, including the financially excluded, small businesses, and entire communities,” says Rosner.
Has fintech matured in 2020?
The endurance and continued success of fintech despite the overwhelming number of challenges, restrictions and pressures is highly encouraging. However, it could be argued that the ‘divide’ between startups and incumbents has never been more apparent than how each has reacted to the pandemic’s paradigm-shifting effect. “Rapid changes in user behavior cannot be met fast enough by incumbents,” posits Koc. “Existing companies’ slow acceptance of financial ‘experiments’ like cryptocurrencies are reflective of their lack of agility.”
The fragmentation of the finance sector has been exposed. Mending this rift will require intense collaboration from both sides in order to support customer needs in an increasingly digital industry. Danny Chazonoff, Chief Operating Officer at Paysafe Group, is optimistic that enhanced coordination will take place, with companies eventually recognising the superior value that ecosystems, instead of siloed efforts, can offer. “Businesses have had to revolutionise the consumer experience in order to stay afloat. The latest report in our ‘’ research series suggested that 36% of online UK businesses consider COVID-19 to have increased their ability to innovate, with around 84% of organisations subsequently altering their operations. Companies will need to depend on one another, collaborate and work closely with regulators.” This advice is all the more pertinent because targeted ecosystems could soon become the world’s unassailable generators of revenue. In fact, McKinsey & Co that, by 2025, 30% of global revenues (US$60trn) will be generated by .
Rosner, while still opining that finance has yet to fully capitalise on the lessons of 2020, concedes that COVID-19’s effect of reframing common operational issues has led to some impressive results in accelerated development. Its legacy in banking, for example, has been a higher level of cloud enablement and agility that will make subsequent innovation faster, easier and better. “Our experience shows that banks which had already adopted cloud were better able to meet the challenges posed by COVID-19. Banks still on their digital transformation journey must continue to steer their operations toward a new operating model, one that delivers highly relevant customer experiences, provides easy access to innovation, and reduces the total cost of ownership.”
Preparing for 2021
In many ways, the digital strategies for 2021 outlined by our commentators could be summarised as ‘fulfilling the promise’ that the previous year has demonstrated as possible. Digital transformation filtered through the lens of the pandemic has laid the foundations for a brand new workplace culture, a revolutionary way of approaching customer service, and a dynamically more engaging user experience. The events of 2020 have left an indelible mark on corporate strategy in fintech that will have an enduring legacy. For Savoy, 2021 represents an exciting opportunity for a year’s worth of thought, planning and hard work to pay off. “Customers have also accelerated their adoption of digital technology, and the pace of this transformation will continue long after COVID-19. Can you imagine going back to the same manual processes, like queuing in banks to send money abroad, when the technology exists to do all of that without leaving your home?”