TSU Implementation of Fintech in Global Firms for Financial Opportunities Discussion

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  • Read the attached article: Desai, Mihir A. "The Finance Function in a Global Corporation." (PDF attached)
  • Familiarize yourself with the general content of all FINTECH Readings and Resources
  • Write an APA paper (no abstract required) stating how you as the CFO would implement FINTECH to enhance the financial opportunities available to global firms in one or more of the three critical functions discussed in the Desai article: financing, risk management, and/or capital budgeting.
  • The APA paper will include the following:
    • Cover Page (note no abstract is required)
    • Two-page minimum original text discussion with references properly cited
    • Reference page with a minimum of three references as follows:
    • 1. Desai, Mihir A. "The Finance Function in a Global Corporation
    • 2. First Reference from the FINTECH Readings and Resources
    • 3. Second Reference from the FINTECH Readings and Resources

FINTECH Reading and Resources


World FinTech Report 2020 (See attached PDF file)




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The Finance Function in a Global Corporation INTERNATIONAL BUSINESS H by Mihir A. Desai From the July–August 2008 Issue istorically, the finance functions in large U.S. and European firms have focused on cost control, operating budgets, and internal auditing. But as corporations go global, a world of finance opens up within them, presenting new opportunities and challenges for CFOs. Rather than simply make aggregate capital-structure and dividend decisions, for example, they also have to wrestle with the capital structure and profit repatriation policies of their companies’ subsidiaries. Capital budgeting decisions and valuation must reflect not only divisional differences but also the complications introduced by currency, tax, and country risks. Incentive systems need to measure and reward managers operating in various economic and financial settings. The Globally Competent Finance Function As companies globalize, they face new financial challenges. The first set of questions summarizes the work of the traditional finance function with respect to external providers of capital. Because a global firm is itself a capital market, the finance function must consider a second set of questions, which addresses the internal capital market, in addition to the first. Traditional questions for the local finance function: How should we finance ourselves? How should we return cash to shareholders? How should we analyze investment opportunities? How should we communicate information to shareholders and lenders? The existence of what amounts to internal markets for capital gives global corporations a powerful mechanism for arbitrage across national financial markets. But in managing their internal markets to create a competitive advantage, finance executives must delicately balance the financial opportunities they offer with the strategic opportunities and challenges presented by operating in multiple institutional environments, each of which has it own legal regime and political risks. There is also a critical managerial component: What looks like savvy financial management can ruin individual and organizational motivation. As we’ll see in the following pages, some of the financial opportunities available to global firms are affected by institutional and managerial forces in three critical functions: financing, risk management, and capital budgeting. Financing in the Internal Capital Market Institutional differences across a company’s operations allow plenty of scope for creating value through wise financing decisions. Because interest is typically deductible, a CFO can significantly reduce a group’s How should our ownership structure influence operations? New questions for the global finance function: How should we finance our subsidiaries? How should we get money out of our subsidiaries? How should we analyze the same investment opportunities in different countries? overall tax bill by borrowing disproportionately in countries with high tax rates and lending the excess cash to operations in countries with lower rates. CFOs can also exploit tax differences by carefully timing and sizing the flows of profits from subsidiaries to the parent. However, tax is not the only relevant variable: Disparities in creditors’ rights around the world result in differences in borrowing costs. As a consequence, many global firms borrow in certain foreign jurisdictions or at home and then lend to their subsidiaries. How should we communicate financial information inside the firm? Multinational firms can also exploit their internal capital markets in order to gain a competitive advantage in countries when financing for local firms becomes very How should we decide what to own and with expensive. When the Far East experienced a currency whom? crisis in the 1990s, for example, and companies in the region were struggling to raise capital, a number of U.S. and European multinationals decided to increase financing to their local subsidiaries. This move allowed them to win both market share and political capital with local governments, who interpreted the increased financing as a gesture of solidarity. But the global CFO needs to be aware of the downside of getting strategic about financing in these ways. Saddling the managers of subsidiaries with debt can cloud their profit performance, affecting how they are perceived within the larger organization and thereby limiting their professional opportunities. Similar considerations should temper companies’ policies about the repatriation of profits. For U.S. companies, tax incentives dictate lumpy and irregular profit transfers to the parent. But many firms choose to maintain smooth flows of profits from subsidiaries to the parent because the requirement to disgorge cash makes it harder for managers to inflate their performance through fancy accounting. Finally, letting managers rely too much on easy financing from home saps their autonomy and spirit of enterprise, which is why many firms require subsidiaries to borrow locally, often at disadvantageous rates. Managing Risk Globally The existence of an internal capital market also broadens a firm’s risk-management options. For example, instead of managing all currency exposures through the financial market, global firms can offset natural currency exposures through their worldwide operations. Let’s say a European subsidiary purchases local components and sells a finished product to the Japanese market. Such operations create a long position in the yen or a short position in the euro. That is, those operations will become stronger if the yen appreciates and weaker if the euro appreciates. This exposure could be managed, in part, by offsetting exposures elsewhere in the group or by having the parent borrow in yen so that movements in the yen asset would be cancelled by movements in the yen liability. Given this potential for minimizing risk, it might seem perverse that many multinationals let local subsidiaries and regions manage their risks separately. General Motors is a case in point. Even though its treasury function is widely regarded as one of the strongest pools of talent within the company—and one of the best corporate treasury functions worldwide—GM’s hedging policy requires each geographic region to hedge its exposures independently, thereby vitiating the benefits of a strong, centralized treasury. Why duplicate so many hedging decisions? Because forcing a business’s hedging decisions to correspond to its geographic footprint gives GM more-accurate measurements of the performance of the individual business unit and of the managers running it. In a related vein, companies often limit—in arbitrary and puzzling ways—their considerable expertise in managing currency exposures. Many firms require finance managers to follow “passive” policies, which they apply in a rote manner. For example, GM actively measures various exposures but then requires 50% of them to be hedged with a prescribed ratio of futures and options. Firms adhere to these passive strategies because they limit the degree to which financial managers can undertake positions for accounting or speculative reasons. So although functioning in the global environment calls for considerable financial expertise, organizational strategy requires that expertise to be constrained so that financial incentives don’t overwhelm operating ones. Global Capital Budgeting In addition to exploiting the de facto internal financial market to mediate between their operations and the external financial markets, CFOs can add a lot of value by getting smarter about valuing investment opportunities. When energy giant AES began to develop global operations, in the early 1990s, managers applied the same hurdle rate to dividends from around the world that they used for domestic power projects, despite the different business and country risks they faced. That approach made risky international investments look a lot more attractive than they really were. The company’s subsequent attempts to improve its capital-investment decision process illustrate the organizational challenges CFOs face as they move from domestic to foreign markets. In order to improve the quality of valuations, AES required managers to incorporate sovereign spreads into their discount rates. Sovereign spreads measure the difference between the rates at which two countries can borrow in the same currency, and they are widely tacked on to discount rates in order to adjust for country risk. Although this method created the semblance of tremendous precision, it came with some curious incentives, particularly for managers charged with securing deals in emerging markets. Knowing that their projects would face very high discount rates, managers forecasted inflated cash flows to compensate. For managers keen to complete transactions, as some at AES were, excessive penalties and precision can result in a less robust process. In extreme cases, the gaming that takes place in a formalized process can undermine the company’s strategy. Consider Asahi Glass, one of the first Japanese corporations to rigorously implement Economic Value Added systems worldwide in order to increase capital efficiency. Asahi set country-specific discount rates based on typical risk measures, including sovereign spreads. The result, however, was that managers overinvested in Japan (because of very low discount rates) and underinvested in emerging markets (because of very high ones). Once again, adopting a narrowly financial approach led to an outcome directly at odds with the company’s strategic objectives. In response, Asahi made a series of adjustments to reconcile its initial, purely financial approach to discount rates with its broader organizational goals. The moral of these stories is that formal methods of valuation and capital budgeting—which work quite well in a domestic context, where the variables are well understood—must be refined as companies globalize. Firms need to make sure that their finance professionals actively discuss potential risks with the country managers who best understand them. Creating a Global Finance Function How can CFOs ensure that their global finance operations make the most of the opportunities at their disposal? At a minimum, they must inventory their financial capabilities and ensure their adaptation to institutional variation and their alignment with organizational goals. To achieve this, a global finance function must do three things well: Establish the appropriate geographic locus of decision making. The example of GM’s approach to hedging makes clear that a finance function must locate decision making at a geographic level where other strategic decisions are made. Even if centralizing decisions can generate substantial savings, these might need to be sacrificed to ensure that the finance function reflects the degree of centralization appropriate for the firm overall. Highly centralized firms can have a large finance function at headquarters that effectively dictates decision making for all subsidiaries; such an arrangement can capitalize on many financial arbitrage opportunities without sacrificing organizational goals substantially. Decentralized organizations, in which country managers are paramount, must replicate some financial decision making at the country level. The finance function must locate decision making at a geographic level where other strategic decisions are made. Create a professional finance staff that rotates globally. Leading companies recruit and rotate financial managers in the same way that they do marketing and operational talent. If companies groom a network of finance professionals who are comfortable in various environments—and have rotated through positions at the country, region, and corporate levels—the dynamic between the financial headquarters, where most expertise resides, and the subsidiary can be a powerful resource in difficult times. Drug giant Novartis is an example. In 2001, the company had to decide whether to continue financing its Turkish subsidiary, which had repeatedly delayed payment to Novartis during periods of crisis. On the numbers alone, the decision would have been straightforward: Force the managers to fund locally or deny shipments of life-saving drugs to the subsidiary. Complicated negotiations ensured that the subsidiary would continue to operate, capitalize on the weakness of its competitors, and ultimately pay back the parent. A successful outcome was achieved only because of the trust built up over many years between finance managers at headquarters and those in Turkey, many of whom had spent time at Novartis subsidiaries around the world. Codify priorities and practices that can be adapted to local conditions. It is tempting to stipulate that cash repatriation policies or investment criteria be applied universally. Such a requirement, however, can sacrifice opportunities that arise locally. Similarly, strategic objectives, as in the Asahi example, may demand flexibility in investment analyses. Smart companies, therefore, formulate policies centrally with an understanding that local idiosyncrasies and strategic imperatives may require exceptions. Specifying the process for making exceptions, such as instituting a standing committee of finance professionals to review possibilities, is critical to ensuring that deviations from the norm are properly managed. • • • Forty years ago, most firms didn’t have CFOs, and the finance function was usually staffed by controllers. As external markets have become more demanding in terms of performance and their requirements for disclosure, the finance function has become more prominent. Now that multinational companies have their own internal capital markets, the finance function must graduate to a more strategically engaged level. A globally competent finance department is one that understands how to reconcile the firm’s financial, managerial, and institutional priorities across its business units. Does yours? A version of this article appeared in the July–August 2008 issue of Harvard Business Review. Mihir A. Desai is the author of The Wisdom of Finance: Discovering Humanity in the World of Risk and Return and a Professor at Harvard Business School and Harvard Law School. This article is about INTERNATIONAL BUSINESS  Follow This Topic WORLD FINTECH REPORT 2020 TABLE OF CONTENTS Preface 3 Executive summary 4 Banks must board the last train to relevancy – the Open X express 6 BigTechs and challenger banks have opened a Pandora’s box of customer expectations. Can banks compete? 6 Why collaboration counts: FinTechs’ specialized tools and expertise can empower banks 7 Open banking was just the beginning 8 The last mile is merely the visible result of customer experience 2 12 But behind the scenes, middle- and back-office operations affect customer perception 12 Back-end transformation can be a bumpy ride – avoid potholes with collaboration by design 14 FinTechs offer innovative enhancements for middle and back offices 16 Structure is essential for bank/FinTech partnership effectiveness 19 The disappointing reality of many bank/FinTech partnerships 19 Effective collaboration requires people, business, and process maturity – on both sides 21 Players that collaborate at scale to industrialize innovation will shine within the Open X sharing economy 25 Appendix 28 Methodology 32 About Us 34 Acknowledgements 35 World FinTech Report 2020 Preface It’s now or never. The financial services industry has been dealing with the impact of open banking since we published the inaugural World FinTech Report in 2017. Fast forward to the World FinTech Report 2020 and the imminent Open X, a multi-sectoral open platform era maximizing the eXperience, and the harsh reality is that FinTechs have moved “from disruption to reality,” and banks that haven't embraced effective collaboration with startups are struggling to retain and acquire new customers. Shaped by hyper-personalized service and mobile-only experience offered by unstoppable and ever-powerful BigTechs and agile challenger banks, consumer expectations are changing in real time. To keep pace, incumbents must embrace Open X and become Inventive Banks, prepared to adopt specialized open ecosystem roles and complementary support from qualified FinTech partners. No longer simply disruptors, FinTechs have matured to become respected, global players with robust acquisition rates and profitability potential. It is up to incumbents to decide whether to consider FinTechs formidable competitors or enabling allies. Most banks understand that a positive last-mile experience and an engaging front end are critical to keeping customers happy and loyal. However, less visible middle- and back-office operations – also essential for customer satisfaction – are often neglected. That’s why, despite substantial front-end investment, many banks continue to fall short of delivering seamless and personalized customer experience. Bringing back-end operations up to speed can be an extended journey. Our World FinTech Report 2020 offers proven methods for banks to join forces with mature FinTechs to map, prioritize, and innovatively enhance their most-critical open platform processes. Despite synergies and the win-win potential of bank/FinTech collaboration, the frustrating reality is that most partnerships have not paid off. Why? Relationship stumbling blocks and differing corporate cultures prevent collaboration at scale, and innovative solutions are rarely solidified – let alone brought to market. Effective collaboration requires people, business, and process maturity from both incumbents and FinTechs. Late-stage FinTechs (scaleups) can drive productivity and value based on their last-mile expertise, data management know-how, and mobile-only mentality. Inventive banks can leverage their reach, trust, and business expertise to optimize their assets and remain relevant to an increasingly diverse customer base. This is especially important given the highly uncertain economic outlook caused by never- seen-before risks. Players with readiness to collaborate at scale and industrialize innovation are the most likely to prosper within the shared Open X ecosystem. We encourage a focus on business outcomes to help both banks and FinTechs move from proof of concept to the profitability of applied innovation or innovation industrialization. First movers will shape Open X roles, standards, and management. Anirban Bose Vincent Bastid Financial Services Strategic Business Unit CEO & Group Executive Board Member, Capgemini Secretary General, Efma 3 Executive summary Time’s up. To remain relevant, traditional banks must get on board with Open X. ƒƒ Consumers expect a lot these days as they have become accustomed to stellar service from BigTechs and challenger banks that leverage their strength – data management – to hyper-personalize customer experience (CX). ƒƒ To catch up with new-age players, incumbents must embrace Open X (an open platform approach in which participants of all sizes and from across industries work together) and become Inventive Banks, prepared to adopt specialized roles in the new, open ecosystem – with collaborative support from qualified FinTech partners. ƒƒ FinTechs have moved from disruption to maturity to become serious, globally expanding players that are acquiring millions of customers and heading towards profitability. It’s time to consider them as tangible competitors or enabling partners. Last-mile customer experience may be the visible result of Inventive Banking, but middle- and back-office operations are critical for CX, too. ƒƒ An engaging front-end requires robust and enabling back-end operations. That’s why, despite substantial front-end investments, most banks still fail to offer seamless and personalized CX. ƒƒ Firms that ignore middle- and back-office innovation can impede the overall experience they offer their customers and in many cases their core technologies are simply unfit for this new world. ƒƒ Bringing middle- and back-office operations up to speed can be daunting. Banks must map and prioritize the most critical transformational processes toward an open platform through collaboration by design with FinTechs. 4 World FinTech Report 2020 Act now, act together, act at scale: Structure is essential for bank/FinTech partnerships to work. ƒƒ Despite obvious synergies between banks and FinTechs, the disappointing reality is that most partnerships have not paid off. ƒƒ Incumbents and FinTechs must address their relationship stumbling blocks to industrialize innovation and obtain positive return on investment. ƒƒ Effective collaboration requires people, business, and process maturity on both sides. –– Late-stage FinTechs (scaleups) can deliver productivity-driving value based on their last-mile expertise, data management experience, and mobile-only mentality. –– Inventive banks can leverage their reach, trust, and business expertise to optimize their assets and remain relevant to an increasingly diverse customer base. This is especially important given the highly uncertain economic outlook caused by never- seen-before risks. ƒƒ Players that collaborate at scale to industrialize innovation will shine within the shared Open X ecosystem. ƒƒ A sharp focus on business outcomes will help both banks and FinTechs move from open innovation (proof of concept) to applied innovation (innovation industrialization). 55 Banks must board the last train to relevancy – the Open X express BigTechs1 and challenger banks2 have opened a Pandora’s box of customer expectations. Can banks compete? The gap between what customers expect and what banks deliver has never been wider. All customers, but in particular the Gen Y3 and younger, demand a seamless, real-time and hyper-personalized banking experience that complements their digital lifestyle. They expect their banks to offer an experience that matches the convenience of today’s popular challenger banks. And they won’t hesitate to switch to one that offers hassle-free, relevant products and services (Figure 1). Non-traditional firms have been tackling some of the pain points customers face with incumbent banks. For instance, BigTechs and challenger banks such as N26 offer KYC and onboarding with a fully digital and seamless customer experience; and that is pushing banks to rethink, revamp, and reshape their customer journey.” —Laurent Herbillon Director, Open Innovation, BNP Paribas Figure 1: Impact of BigTechs and challenger banks on the banking industry CUSTOMER PERSPECTIVE My primary bank: has a narrow range of products and services | | does not exactly match my needs or preferences | | is not well integrated with other platforms or apps I use daily 16% 48% 26% of overall customer of new-age customers* likely to switch banks in 12 months of new-age customers* Note: *denotes Gen Y and tech-savvy consumers who are part of the overall customers group. Top reasons customers adopt banking services from non-traditional players 70% attracted by low-cost offerings 68% seek ease of use 54% want faster service 39% pursue better features 39% want personalized products Sources: Capgemini Financial Services Analysis, 2019; World Retail Banking Report 2019 – Voice of the Customer Survey. 1 2 3 6 BigTechs are technology giants that dominate their respective sectors, such as Amazon, Ant Financial, Apple, Facebook, Google, and Tencent. BigTech dominance is due to their understanding of the market and its needs, access to vast amounts of customer data, and delivery of delight-inducing products and services. Challenger banks are pure players with a “mobile only” designed banking experience, usually operating in multiple countries. They have their own banking license and are cloud native, operating on an open and evolutive platform. In contrast, neobanks are subsidiaries/affiliates of traditional banks (usually linked to the same core banking system) providing online/mobile experience (with possible access to branches) while usually leveraging the same banking license. Gen Y: Customers who were born between 1983 and 2002. World FinTech Report 2020 2019 Capitalizing on the growing demands for improved services, BigTechs and challenger banks are not wasting time when it comes to expanding their offerings and market penetration. Through an open and evolutive platform, they have strategically evolved and scaled their financial services (FS) capabilities and now pose a tangible threat to established banks. A “do-what-you-do-best” approach maximizes impact (and therefore returns), allowing each participant to contribute to customer experience as well as to open ecosystem profitability. BigTechs and challenger banks are ‘born digital, born data.’ They can have a data-driven relationship, leveraging data in creative ways to drive customer insights. In contrast, traditional banks are product-driven, with data used for risk behavior only.” Many of these players broke into the market with a single offering (often payments) and then ventured into lending, savings, wealth management, and beyond. Tech giants and challenger banks now offer multiple financial services and are aggressively growing their presence through investment in FinTechs globally. (For additional insights, see Figure A1 and A2 in Appendix). —Carlos López-Moctezuma BigTechs and challenger banks have established their position playing on their strengths, leveraging the wealth of data through open and evolving platforms to offer customers a convenient, personalized experience (Figure 2). Global Head of Open Banking, BBVA Figure 2. BigTechs and challenger banks leverage high-impact capabilities Built for mobile, delivered online resulting in low fixed operating cost. New products launched with micro-service approach brings business and technology together to quickly and effectively go to market. Mobile-only model Agile approach at scale Model built to easily plug and play new solutions — test, improve, and scale them to continuously offer better services. Customer-centric design BigTech & challenger bank strengths Effective collaboration Data insights Open-platform model Highly intuitive approach, new ways to interact in real time. Enables hyper-personalization with data protection. Artificial intelligence and automation used to develop open and evolutive API-based platforms. Sources: Capgemini Financial Services Analysis, 2020; CB Insights, 2019. Why collaboration counts: FinTechs’ specialized tools and expertise can empower banks FinTechs are maturing and increasing their offerings, market presence, and customer base. The ability to fuse innovative technology expertise with an obsessive customer focus is driving FinTech success, which enhances their attractiveness in terms of partnership suitability. Now more than ever, bank/FinTech collaboration is a powerful strategy to help incumbents across the business value chain fill gaps in operations, regulations, onboarding, data, technology adoption, and CX – to give today’s customers what they demand. However, collaborating at scale will require traditional banks to identify and prioritize the critical customer journeys they need to reinvent and the initiatives they expect to accomplish by working with FinTechs across open platforms. See page 14 for more information. 7 Examples of challenger banks and incumbents partnering for profitability with FinTechs: • Berlin-based challenger bank N26 began a partnership with London-based online money transfer service TransferWise to help N26 customers save forex fees when making payments in foreign currencies.4 • London-based Revolut collaborated with Currencycloud (a New York-based API and service provider for cross-border payments) that allows users to transfer currencies from all over the world. Currencycloud gives Revolut customers access to the Currencycloud payment network via APIs that can integrate in two hours, without applying for new regulatory permissions.5 • Commerzbank, a major German bank, collaborates with IDnow, a late-stage German scaleup that uses machine-learning to verify its customers’ identities via video on a smartphone or computer. The result? A 50% higher conversion rate, and 30% of Commerzbank customers verifying their identity through IDnow.6 Open banking was just the beginning Although it is a transformational catalyst, open banking is not the FS endpoint. It is a stepping stone to free-flowing information and a sharing-economy ecosystem that is beneficial to all participants as part of the impending era we call “Open X.” What is Open X? Seamless exchange of data and resources expedited product innovation Improved experience for customers So, banks must evaluate where they can most efficiently and profitably play within this open – and sharing – value-creation process. The process begins with collaboration, but that only scratches the surface of the full potential of an open ecosystem. When data and resources are shared, the environment is ripe for innovation, exponentially better products and services, and customer experience that rivals the trendsetters. 4 5 6 7 8 8 Only 6% of banks that have collaborated with FinTechs have achieved their desired and anticipated return on investment. What’s more, Bank/FinTech partnerships have focused almost exclusively on front-office operations.7 The fact is that banks should also deploy FinTech capabilities across their business value chain to enable seamless data sharing from the front office to the middle and back offices while also transforming backend operations to connect with third-party partners. Industrializing an open ecosystem means leveraging FinTech capabilities to create a streamlined platform system that integrates external ecosystem players seamlessly. There is no denying that customers want to conduct financial transactions through high-engagement channels such as WhatsApp, Slack, WeChat, Amazon, or whatever comes next. Therefore, banks that don’t want to become a utility provider with just data pipes (merely transferring data from one place to another without any input) must embrace platform models.8 The task ahead is to create open and evolutive platforms that act as building blocks to produce and integrate a wide range of relevant products and services to accommodate the fast-paced lives of today’s bank customers and their wide-ranging financial needs. Platformification has become a mantra for successful businesses across different industries. Open X ecosystem participants leverage their key strengths. Open X leapfrogs the compliance-based approach of open banking and moves to a seamless eXchange of data and resources empowered by an eXpedited product innovation cycle that continuously improves customer eXperience (Figure 3). N26, “Seamless international money transfers with TransferWise,” February 29, 2016, https://n26.com/en-eu/transferwise. Currencycloud, “Building a global money app with Revolut,” April 20, 2016, https://www.currencycloud.com/company/case-study/building-a-global-money-app-with-revolut/. IDnow, “Case Study: Commerzbank,” https://www.idnow.io/docs/case-study/IDnow-CaseStudy_Commerzbank_EN.pdf, accessed February 2020. Capgemini Retail Banking Report 2019 – Voice of the Customer Survey. Ibid. World FinTech Report 2020 Figure 3. Open X for enhanced CX g Economy arin AP Sh IS, In Product Tr ad iti o n a l in Bank Ownership Shared access OPEN X Data Assets n, Infrastructu re atio rm fo Experience Partnership g Build/Buy Source: Capgemini Financial Services Analysis, 2020. Uber is a prime example of a non-financial player using the full potential of the Open X ecosystem. Uber customers experience a seamless ride-hailing service with administrative processes in the background and not apparent. Uber built its flagship ride-booking offering on a partnership model with car owners, in which Uber provides a platform. It relies on Google Maps for its navigation and ten different payment integrations from credit cards to regional payment methods such as Paytm in India, Venmo in the US, or iDEAL in the Netherlands.9 In Mexico, Uber partnered with BBVA debit cards so its driver-partners could access real-time payments and debit card spending information by using their smartphone app.10 With expertise from Visa and Barclays, Uber launched a credit card in the US that offers Uber cash rewards that consumers can apply as payments in every Uber application.11 For its food delivery offering, Uber Eats, it created a three-sided marketplace with customers, restaurant partners, and delivery partners. By leveraging open APIs and a collaborative ecosystem, Uber is venturing into additional services, including Uber Freight, Uber Works, Uber Voucher, and JUMP bikes and scooters. 11 12 It is essential to be present in digital ecosystems like our partnership with Uber–in which Uber operates in the daily lives of our clients and potential clients.” —Carlos López-Moctezuma Global Head of Open Banking, BBVA Players must focus on what they do best and then position themselves within the most beneficial Open X ecosystem role.12 Open X challenges incumbent banks to liberate themselves from long-held mindset barriers to become an Inventive Bank – agile, customercentric specialist prepared to face the new age of financial services. Inventive bank transformation begins with incumbents determining a strengthsbased Open X role that will generate maximum value through collaboration with partners (Figure 4). Uber, “Engineering Uber’s Next-Gen Payments Platform,” December 5, 2018, https://eng.uber.com/payments-platform/. 10 BBVA, “Uber hails BBVA as it launches Uber Money,” https://www.bbva.com/en/uber-hails-bbva-as-it-launchesuber-money/, accessed February 2020. 9 Barclays, “Uber Credit Card,” https://cards.barclaycardus.com/banking/cards/uber-visa-card/, accessed February 2020. The roles are specific to one business model/solution. A bank can play multiple roles at one time, but for differnt business requirements. 9 DISTRIBUTION External Figure 4. Banking evolution: from open banking integrated bank to Open X inventive bank, with role specialization Inventive bank Inventive bank SUPPLIER ORCHESTRATOR as a as an A Supplier develops products and services delivered in white-label to a third party for distribution. Inventive bank as an AGGREGATOR Universal bank as an Internal The traditional role of Integrator applies to banks as “Universal bank” in full control of products and services from development through distribution. An Orchestrator connects Aggregators and Suppliers and ensures their interactions generate maximum value in the open marketplace. INTEGRATOR Internal An Aggregator leverages its distribution channels to distribute under its brand other players’ products. PRODUCTION External Source: Capgemini Financial Services Analysis, 2020. While challenger banks and BigTechs are well-positioned for the Orchestrator role, incumbents should choose their role strategically. Orchestrator success will rely on a reliable core platform and an open infrastructure that leverages data effectively and integrates with other ecosystem players quickly and easily. Although the Orchestrator role can be lucrative, traditional banks may find it challenging to become a pure-play intermediary. As we noted in the World FinTech Report 2019, pure-play orchestrators offer similar competing products and services (possibly including their own) from several players without supplier bias. Incumbents forced to promote their products alongside those of competitors may face conflicts of interest or cannibalization. Although they may not be pure-play orchestrator candidates, traditional banks can build functionalities to connect and coordinate products and services without cannibalizing their proprietary innovations. They can offer customers value-added services by leveraging complementary FS or non-FS solutions from FinTech firms and third parties. Nevertheless, most incumbents continue to hold on to their traditional integrated role. Now is the time, however, for banks to evaluate their strengths and leverage their strongholds, to work with ecosystem partners to fill developmental gaps, and to decide – strategically – which Open X role will be the best fit. Early movers will have a decidedly competitive advantage. In the United States, for example, investment bank Goldman Sachs is adopting technology solutions to enable it to extend loans to small- and medium-sized businesses via Amazon’s lending platform.13 And, in early 2020, the Spanish banking group BBVA launched a pilot plan with Amazon to sell their FS and non-FS services. The arrangement is part of BBVA’s broader strategy to eventually sell digital banking products via the GAFA giants.14 Both Goldman Sachs and BBVA seek to leverage Amazon’s vast distribution network to sell products. For Amazon, banking partnerships bolster its mission to more widely profit from its enormous marketplace and to get around some regulatory requirements. Business Insider, “What an Amazon and Goldman Sachs partnership means for Wall Street and fintechs,” February 27, 2020, https://www.businessinsider.in/tech/news/what-an-amazon-and-goldman-sachs-partnership-means-for-wall-street-andfintechs/articleshow/74015178.cms. 14 Mobile Payments Today, “BBVA launches sales on Amazon with eye towards financial products,” January 2, 2020, https://www.mobilepaymentstoday.com/news/bbva-launches-sales-on-amazon-with-eye-towards-financial-products/. 13 10 World FinTech Report 2020 Innovative telecom player disrupts banking through partnerships – Achieves success through a CX focus and an Open X orchestrator role Business case: Orange, a telecom, launched a mobile-only bank in France in 2017 in a bid to diversify its portfolio in the financial services industry. To sustain long-term growth, Orange executives sought new avenues of growth through vertical adjacencies to leverage the value of its telecom infrastructure. After a successful debut at home, Orange Bank expanded operations to Spain in November 2019.15 Implementation: Orange leveraged the expertise of ecosystem partners to create an experience-led mobile-only bank. Focusing on user experience versus products, Orange collaborated with Munich-based Wirecard for contactless payments and the digital-first platform from Amsterdam-based Backbase for omnichannel digital banking.16, 17 Orange Bank adopted a shared-access strategy via collaborations such as those with inWebo for identity and two-factor authentication.18 Following a data-driven approach, Orange leverages Watson (IBM’s artificial intelligence platform for business) to power its Djingo chatbot, and Salesforce for CRM to analyze customer data for providing highly customized services.19 Tie-ups with Franfinance for consumer credit services and Singapore-based Moneythor for personal financial management offer additional examples of Orange Bank’s partnership-led model.20, 21 Results: Assuming an Open X orchestrator role, Orange Bank acts as an experience coordinating platform while sourcing the best services/products from other relevant players. Two years after launching, Orange Bank is on its way from disruption to maturity and handles 344,000 accounts and has issued 122,000 loans.22 Finextra, “Orange Bank launches in Spain,” November 26, 2019 https://www.finextra.com/newsarticle/34840/orange-bank-launches-in-spain. 16 Wirecard, "Wirecard collaborates with Orange Money to launch innovative new digital payment and banking," May 6, 2019, https://www.wirecard.com/en-ap/company/press-releases/wirecard-collaborates-with-orange-money-to-launch-innovativenew-digital-payment-and-banking-service-in-eastern-europe. 17 FinTech Futures, “Orange Bank goes live with Backbase banking platform,” November 13, 2017, https://www.fintechfutures.com/2017/11/orange-bank-goes-live-with-backbase-banking-platform. 18 The Paypers, “Interview with Didier Perrot, inWebo on authentication and identity management,” June 20, 2018, https://thepaypers.com/interviews/interview-with-didier-perrot-inwebo-on-authentication-and-identitymanagement/773635-38. 19 Orange, “Orange Bank brings unique customer experience with its virtual advisor powered by IBM Watson,” March 6, 2018, https://www.orange.com/en/Press-Room/press-releases/press-releases-2018/Orange-Bank-brings-uniquecustomer-experience-with-its-virtual-advisor-powered-by-IBM-Watson. 20 Les Echos, “Orange bets on free services to launch its offensive in banking,” April 21, 2017, https://www.lesechos.fr/2017/04/orange-fait-le-pari-de-la-gratuite-pour-lancer-son-offensive-dans-la-banque-170490. 21 Moneythor, “Orange Bank relies on Moneythor for new digital bank,” December 5, 2017, https://www.moneythor.com/2017/12/05/orange-bank-relies-on-moneythor-for-new-digital-bank/. 22 Moneyworld Live, “Orange Q3 driven by growth away from home,”October 29, 2019, https://www.mobileworldlive.com/featured-content/home-banner/orange-q3-driven-by-growth-away-from-home/. 15 11 The last mile is merely the visible result of customer experience But behind the scenes, middle- and back-office operations affect customer perception In recent years, banks have invested heavily in IT to improve customers’ last-mile experience. However, customers remain underwhelmed because they say banking services have not grown to the superstar levels they expect and receive from a few other sectors. The lack of perceivable CX improvement may stem from banks’ bare-bones attention to middle- and back-office operations. And, now, these ignored behind-the-scenes processes are blunting the positive impact of front-end investments and collaboration (Figure 5). Figure 5: Unsupported middle-and back-office operations can freeze last-mile performance share of new IT investments 33% (of overall IT investment) in 2019 growth in IT spending 4% annual by banks during 2016–2019 Agile User-friendly AI-driven Front-office operations Experiential API-enabled Middle-office operations Cumbersome manual processes Poor employee experience Back-office operations Legacy systems High maintenance cost Low scalability Low share of IT budget Personalized High share of IT budget up from 24% in 2016 Paper-based documentation UNPRODUCTIVE PLATFORMIFICATION Lackluster customer satisfaction 50% have not had an integrated banking experience 58% cannot access all accounts from a single platform 60% are unable to make direct banking payments on different platforms (merchants) 56% abandonment rate in UK banks in 2018, up from 40% in 2016 Sources23: Capgemini Financial Services Analysis 2020; World Retail Banking Report, 2019; Celent, 2019; The Financial Brand, 2019; Signicat, 2018. 12 World FinTech Report 2020 As data and technology proliferate, banks are transforming their business models to keep pace with the changing industry landscape and customer expectations. However, continued layering of processes to enable new business models onto legacy infrastructure can hamper efforts to channel investments that drive end-to-end optimization. Manual, disconnected, paper-based, and siloed tasks often weigh down these procedures, and impacts new offerings’ speed to market and customer response time. The result is fragmented CX. Therefore, banks must funnel resources and attention to the middle and back offices and recalibrate these functions with customers’ last-mile experience. Banks’ digital renaissance often superficially focuses on the front end. Yet, to succeed in the Open X ecosystem, banks must optimize and streamline their end-to-end value chain. Based on the size and scale of operation, a bank could have more than 300 to 800 middle- and back-office processes.24 Without changing internal processes, problem areas will be externalized, and banks will be unable to fulfill their customer experience objectives. Thus, it is important to digitize internal processes to generate effective results.” —Carlos López-Moctezuma Global Head of Open Banking, BBVA How middle- and back-office functions became submerged: Complex business processes As a result of their traditional product-centric approach, incumbents often layer new models on top of old, which has led to complicated business processes that are difficult to automate. Compliance-centric architecture In response to regulatory demands, typical bank IT architecture is complex and implemented intermittently as quick fixes demand. Redesigning these ingrained systems may take years and cost hundreds of millions of dollars. Lack of agility Banks struggle to find the skills needed to introduce new automated processes. Historically, IT teams have practiced waterfall methodologies (linear project management) that limit middle- and back-office process automation. Out of the (business) loop Many IT transformation teams lack visibility to bank business priorities. Therefore, IT project decisions are made within a silo and without thought to the full spectrum of integration options. Celent, “Global tech spending forecast, Banking edition 2019," Stephen Greer, Gareth Lodge, Juan Mazzini, and Eiichiro Yanagawa, March 28, 2019, https://www.celent.com/insights/964486482; ” The Financial Brand, “Consumers demanding improved digital banking customer engagement,” Jim Marous, August 12, 2019, https://thefinancialbrand.com/87006/ customer-engagement-digital-banking-cx/; BACS, “The battle to on-board II: The European perspective on digital on-boarding for retail banks,” September 2018, https://www.bacs.co.uk/documentlibrary/Current_Account_Switch_Service_discussion_paper_consumer_switching.pdf. 24 Banking Dive, “Why back-office automation is the secret to better banking,” August 1, 2019, https://www.bankingdive.com/spons/why-back-office-automation-is-the-secret-to-better-banking/559849/. 23 13 Back-end transformation can be a bumpy ride – avoid potholes with collaboration by design In the Open X ecosystem, banks need data-driven and customer-centric partnerships to drive middle- and back-office transformation. Collaboration by design is an approach that draws inspiration from value-sensitive design (VSD) principles. It focuses on seamless CX by enhancing the most high-impact middle- and back-end processes (Figure 6).25 Identify: Phase 1 requires the bank to assess its current end-to-end processes to detect friction or e itiz ior Pr Flag potential friction by mapping processes, customer journeys, and information flow Ide nt ify Figure 6. Collaboration by design in three iterative steps: Identify, Prioritize, Collaborate Collaborate Define success and prioritize expectations, objectives Seek complementary strengths in collaborative partners Source: Capgemini Financial Services Analysis, 2020. bottlenecks. Some banks base digital initiatives on the customer lifecycle to map customer interactions. However, this approach doesn’t allow for the impact of the middle and back office on customer experience. A customer journey-led transformation is more The flow of becoming a customer is one of the most important for an online platform like Nordnet. To improve this all-important customer journey, we use ‘progressive disclosure’ to not overwhelm customers with questions and maintain clarity in all communications, including regulatory matters.” —Rasmus Järborg, Chief Product Officer, Nordnet realistic than a customer lifecycle approach. To connect and map disparate customer interactions, banks must comprehensively plan the journey itinerary (Figure 7). A data-centric journey map – aligned with middle- and back-office processes and information flow – will capture impact at every customer touchpoint. Moreover, journey mapping helps banks organize uncoordinated processes spread across various functional silos around a single end-to-end route. While customer journey mapping as a tool is widely used by banks, it is yet to achieve quality and integration maturity. For example, Bank of Montreal has a Process Center of Excellence that maps customer journeys and uses analytics to derive a data-centric customer route. The bank conducts data analysis on a vast number of customer journeys, which helps it evaluate various tasks and processes. This digital data highlights customer intentions versus actual behavior.26 VSD systematically accounts for human values throughout the design process through analyses of direct and indirect stakeholders, distinctions among designer values, values explicitly supported by the technology, and a commitment to progress (not perfection). University of Washington, Department of Computer Science & Engineering, “Value Sensitive Design,” Batya Friedman and David Hendry, June 6, 2019, https://www.vsdesign.org. 26 DM Magazine, “Embracing Journey Analytics: Interview with Lorei Bieda, Bank of Montreal,” Stephen Shaw, January 15, 2019; http://dmn.ca/embracing-journey-analytics/. 25 14 World FinTech Report 2020 Customer Journey Figure 7: Onboarding is one of many customer journeys to be mapped Onboarding request Point of service KYC Customer account set up Customer onboarded Issue Prospect Data Regulatory Documentation Correspondence credentials/ management management* compliance Master agreement Information Exchange Customer Data capture * Data types: Customer reference data, party data, location data. Denotes flow of data within different processes. Sources: Capgemini Financial Services Analysis, 2020; BIAN Standard v7.0. Prioritize: Phase 2 begins with prioritizing middle- and back-office processes by assessing their operational efficiency and impact on customer experience (Figure 8). Moreover, banks can accept quick-wins or adopt a procedure that may be less impactful but easier to transform. By overlaying middle- or back-office processes with the customer journey, banks can identify tactical issues such as paper-based and manual processes, overlapping and redundant processes, and high-cost processes. Next, the bank must align benefits and expected outcomes with its overall business strategy and Low CUSTOMER EXPERIENCE IMPACT High Figure 8: Prioritizing processes to collaborate and transform the end-to-end customer journey CHANGE TO ENGAGE COLLABORATE TO LEAD Focus on front-end processes to enhance customer experience Overall front- and back-end improvement to transform end-to-end customer journey LEGACY PROCESSES TRANSFORM TO PERFORM Manual/paper-based tasks and functional silos can cripple traditional processes Focus on middle-and back-office processes to boost operational efficiency Low OPERATIONAL EXCELLENCE IMPACT High Source: Capgemini Financial Services Analysis, 2020. 15 priorities. Emerging technologies (such as second generation of RPA, AI, machine learning, and NLP) can be leveraged to optimize or replace existing processes. Banks then use their findings from phase 2 to envision and create a future-state customer journey that addresses tactical issues and aligns with business priorities. A future-ready enterprise, equally focused on improving CX and achieving operational excellence, can outperform competition and improve its bottom line by up to 16% over industry peers, according to a recent MIT study.27 Collaborate: As part of phase 3 (collaboration by design), incumbents boost their agility and responsiveness to customer expectations by partnering with FinTechs. Data management, cost reduction, and agility are FinTech competitive advantages, according to the World FinTech Report 2018. Traditional banks that digitize their middle- and back-office processes by leveraging FinTech expertise will fold these advantages into their own competitive arsenals.28 Transformation can augment bank productivity, enhance customer engagement, reduce costs, increase transparency, and boost employee satisfaction. The value captured from effective FinTech partnerships can help incumbents improve top- and bottom-line growth. Moreover, reinvesting these savings can drive continuous process improvements. A hybrid model that includes in-house development capability as well as collaboration with FinTechs is the way forward in terms of digital transformation for established banks and can help mitigate the risk of attracting bad-fit partners.” —Adizah Tejani Digital Innovation Lead, HSBC Retail Banking and Wealth Management Swedish bank benefits by following the principle of “collaboration by design” To improve its middle- and back-office processes, Swedish online bank Nordnet maps 15 key customer journeys and breaks them down in smaller segments. Next, the firm evaluates the critical processes on two dimensions – customer experience and operational excellence – to identify areas of improvement (such as cost and degree of manual tasks). This practice helps Nordnet assess technology solutions (including those based on cloud, RPA, or artificial intelligence) to streamline its internal processes. Lastly, the bank evaluates mature startups with aligned capabilities that can plug into the Nordnet platform quickly. FinTechs offer innovative enhancements for middle and back offices Banks should clearly define their business needs, use cases, and goals and then select the best-fit FinTech partner to help build a delight-inducing customer journey (Figure 9). Before banks can change their business models and processes, they must consider data protection/compliance concerns. FinTechs/RegTechs can fill in the gap with trusted data protection and regulation platforms.” —Nicolas Prince CEO, RegData MIT Sloan Management Review, “Is your company ready for digital future,” Peter Weill and Stephanie L. Woerner, December 4, 2017; https://sloanreview.mit.edu/article/is-your-company-ready-for-a-digital-future/. 28 Capgemini, “World FinTech Report 2018,” 2018; https://www.capgemini.com/wp-content/uploads/2018/02/world-fintech-report-wftr-2018.pdf. 27 16 World FinTech Report 2020 Figure 9: FinTechs enable a better customer onboarding process Data Management and Analytics Onboarding request Data capture Tookitaki Holdings United Overseas Bank  5% increase in true positives and 40% drop in false positives in AML transaction monitoring. Emerging technologies to automate compliance processes Datameer  Analytics run time reduced from five days to five hours. Enhanced big data capabilities Hyper-personalization improved CX Deutsche Bank Regulatory Compliance Finantix  Smart KYC offered document processing in 35 languages and performs automatic daily scans of news on existing clients. Bank reporting stays up to date DZ Bank Akbank KYC Onboarding Vectra Digital onboarding in less time, lower cost Error-free, less resource requirements  Reduced security operations workload by ~36 times.  Detects hidden attackers in data centers to mitigate risk of insider threats. Document Processing Cyber incidents predicted to be a top global business risk in 2020 Digital Signature and Contract Management Increases efficiency and transparency with faster processing Reduces costs and improves security with minimal or no use of paper trail Morgan Stanley Customer account set-up FinTechs will help secure customer data and reduce operational downtime API-based solutions to improve document management processes without use of middleware Box  Box enabled secure and efficient sharing of documents between bank and the customers. Morgan Stanley avoided building out its own secure content management system. Onboarding complete Sources29: Capgemini Financial Services Analysis, 2020; Datameer, The Business Times; Vectra; Private Banker International; Business Insider; Insurance Business America; Medium. 29 Datameer, January 2018, https://www.datameer.com/wp-content/uploads/2018/01/akbank-case-study.pdf; United Overseas Bank Limited, August 24, 2018, https://www.uob.com.sg/web-resources/uobgroup/pdf/newsroom/2018/UOB-and-Tookitakistrengthen-combat-against-money-laundering.pdf; Vectra, https://content.vectra.ai/rs/748-MCE-447/images/ CaseStudy_2019_DZ_Bank_Achieving_security_and_privacy_English.pdf; Private Banker International, July 4, 2019, https://www.verdict.co.uk/private-banker-international/news/deutsche-bank-uses-ai-streamline-kyc; Business Insider, July 29, 2019, https://www.businessinsider.com/morgan-stanley-launches-digital-vault-for-wealth-management-2019-7?IR=T; Insurance Business America, January 27, 2020, https://www.insurancebusinessmag.com/us/news/breaking-news/these-arethe-top-10-business-risks-around-the-world-in-2020-211542.aspx; Medium, June 1, 2019, https://medium.com/esignly/bestelectronic-signatures-solutions-for-banking-finance-industry-89a75888f192. 17 Santander UK improved the customer journey by digitizing onboarding and reducing the process from days to minutes Business case: In its efforts to improve the customer journey, Santander UK sought to align its business model with customer needs. The bank embarked on a mission in 2019 to transform its onboarding process by harnessing the power of digital.30 The bank’s onboarding process was plagued with unreliable response times and lengthy completion and needed an overhaul. By automating and digitalizing the process, Santander UK sought to take a step toward a digital bank to differentiate itself from other incumbents. To accomplish this goal, the bank actively collaborated with various FinTech firms.31 Implementation: Santander embraced design thinking and an agile approach to create both customer-centric and employee-centric onboarding processes. The bank organized a cross-functional team of stakeholders to prioritize critical processes in the end-to-end customer onboarding journey. Santander adopted an API-based strategy with robotic process automation functionality as its digital onboarding framework. Throughout the project, the bank reimagined the onboarding experience from its customers’ and employees’ perspectives, which helped to define expected benefits from the transformation. The bank collaborated with FinTech firms to improve or replace processes and to optimize its end-to-end customer onboarding journey. Collaborative partners included Quadient (dynamic form functionality), Comply Advantage (AML), DocuSign (digital signature capabilities), DueDil (KYB), TransUnion (KYC), and nCino (bank operating system).32, 33, 34 Results: The new digital system reduced customer onboarding time from seven days to just 15 minutes, when compared with the traditional in-branch process. Moreover, Santander UK expects to reduce costs annually to the tune of millions of pounds.35 Further, collaboration with FinTechs helped the bank adopt novel technologies and streamline its middle- and back-office processes. For instance, the cloud-based platform from US-based nCino helped the bank replace manual processes and 13 disparate legacy systems to a single end-to-end solution. Santander, “Digital onboarding to improve our customers’ experience,” https://www.santander.com/en/stories/digital-onboarding-to-improve-our-customers-experience%20, accessed February 2019. 31 Efma, “Banking Innovation of the Month: Transforming SMEs’ Onboarding by Santander,” July 16, 2019, https://www.efma.com/article/detail/31607. 32 Computerworld, “How Santander UK cut customer onboarding from days to hours,” Charlotte Trueman, October 28, 2019, https://www.computerworld.com/article/3448544/how-santander-uk-cut-customer-onboarding-from-days-to-hours.html. 33 Finextra, “Santander UK adopts nCino Bank Operating System to replace 13 legacy systems,” September 26, 2019, https:// www.finextra.com/pressarticle/80047/santander-uk-adopts-ncino-bank-operating-system-to-replace-13-legacy-systems. 34 Quadient, “Outperform at Onboarding: Put the Customer First,” Rob Daleman, May 28, 2019, https://www.quadient.com/blog/outperform-onboarding-put-customer-first. 35 Efma, “Banking Innovation of the Month: Transforming SMEs’ Onboarding by Santander,” July 16, 2019, https://www.efma.com/article/detail/31607. 30 18 World FinTech Report 2020 Structure is essential for bank/FinTech partnership effectiveness The disappointing reality of many bank/FinTech partnerships win-win synergies. But success looks different for each participant, and a lack of focus leads to unimpressive results and dissatisfaction all around.36 Now, more than ever, incumbent banks and FinTechs are convinced that collaborative partnerships offer Neither partner meets objectives • More than two out of three bank executives are disappointed by collaborative open banking implementation initiatives. • Partners’ strategic priorities and KPIs do not align. –– Goals not achieved Failure is not an option We’ve heard it before. But now, with an uber-competitive Open X environment on the horizon, there is little leeway for incumbents and FinTechs to waste time or resources on partnerships that don’t yield results. Lackluster returns • Three-quarters of banking executives said they did not achieve productive results from collaboration. • Unstructured collaboration often results in an ineffective assessment of partner strengths and a poor balance of assets. –– Unquantifiable return on investment FinTechs are not immune to typical startup shortcomings, and they frequently bring a zealous newcomer mindset to collaborative efforts, often to the frustration of traditional partners.37 Capgemini, World Retail Banking Report 2019, October 29, 2019, https://worldretailbankingreport.com/resources/world-retail-banking-report-2019/. 37 Capgemini, World FinTech Report 2019, June 4, 2019, https://www.capgemini.com/es-es/wp-content/uploads/sites/16/2019/06/World-FinTech-Report-WFTR-2019_Web.pdf. 36 19 Perception vs reality: Collaboration through FinTech eyes Organizational culture • Seven out of 10 FinTech firms don’t see eye-to-eye (culturally, organizationally) with their collaborative bank partner • Banks’ legacy infrastructure and complex processes impede FinTechs’ naturally fast-paced work style –– The result? A cultural gap that hinders collaborative results Process barriers • More than 70% of FinTechs say they are frustrated by incumbents’ process barriers • Comfortable within a flat organizational structure, FinTechs are exasperated by banks’ highly siloed environment –– Intricate business lines often obstruct navigation and direct communication Funding • Half of FinTechs don’t have the funds to scale their operations • And for early stage FinTechs, low strategic financing makes operational expansion and product commercialization difficult38 Leadership involvement • Six out of 10 FinTechs perceive a lack of requisite CXO-level commitment from their partner bank • Apparent disinterest from high-level bank influencers leads to commitment issues and collaboration breakdown39 Mismatched alliance • More than half of FinTech executives say they have not identified the right collaborative partner • FinTech misunderstanding about the bank and its business problem, or the product and its scalability, tend to create a mismatch during collaboration –– The project eventually fails Collaboration preparedness remains a low priority for incumbents Figure 10. Banks’ collaboration frustration People Only 19% have a dedicated innovation team that has decision-making authority Only 31% ring-fence startup culture and collaboration team Finance Business Technology Only 25% are ready for the fail-fast approach Only 21% engage with external experts (for mentorship and evaluating startup maturity) 58% still depend on Only 6% have achieved the desired ROI from the collaboration Only 27% find it easy to onboard FinTechs Only 21% say their systems are agile enough to collaborate legacy infrastructure Sources: Capgemini Financial Services Analysis, 2020; World Retail Banking Report 2019. Forbes, “10 Key Issues For Fintech Startup Companies,” Richard D. Harroch and Melissa Guzy, October 12, 2019, https://www.forbes.com/sites/allbusiness/2019/10/12/fintech-startup-companies-key-challenges/#3244bf193e45. 39 The Finanser by Chris Skinner, “Banks and FinTech Partnerships: a Clash of Extremes,” Chris M Skinner, July 11, 2019, https://thefinanser.com/2019/07/banks-and-fintech-partnerships-a-clash-of-extremes.html/. 38 20 World FinTech Report 2020 Why are successful partnerships so rare? Let us count the ways. Ownership dilemma: Banks approach innovation with the end goal of owning it, which limits the variety of offerings they can provide and drive customers away to other players. Bureaucracy: Many banks have various functional units operating in silos, and before a partnership is approved, each group must sign off. This time-consuming approach does not bode well for nimble FinTechs.40 Cost of innovation: Hindered by technology spending constraints, banks must sometimes take shortcuts and apply innovation to only a segment of the value chain, which can end up delaying or forcing the cancellation of a product launch. Both incumbent banks and FinTechs require maturity and collaboration readiness skills to mitigate partnership challenges. Effective collaboration requires people, business, and process maturity – on both sides Sustainable partnerships are the need of the hour, as both banks and FinTechs seek to make the most of collaborations. FinTechs must move from early stage startup behaviors to those of a scaleup if they hope to industrialize or commercialize their innovations. Leading collaboration best practices reveal a direct path to FinTech maturity41 (Figure 11). Figure 11. Collaboration best practices: FinTech perspective (%) 67% Emphasis on agility 58% Leadership involvement 67% Setting and monitoring KPIs 56% Proactive innovation 64% Governance and risk management 53% Cultural compatibility Sources: Capgemini Financial Services Analysis, 2020; World Retail Banking Report 2019. 40 41 Ibid. A scaleup is a mature startup that has raised more than EUR 1 million in funding or is profitable, has a full-time employed top management team, and has sustainable business traction (>EUR 200K revenue per year). 21 To turn best practices into action, FinTechs must develop specific desirable characteristics. A structured assessment can determine which capabilities must be enhanced to attract suitable bank partners and effectively collaborate. • Product: FinTechs should convert their innovation into a minimum viable product. To create a matured disruption, FinTechs should assess their product’s scalability and commercial capability. • Management: While FinTechs take pride in their fast-paced culture, it is essential to build cohesiveness by mapping skill sets to the needs of their collaborative partner. A vision-driven partner bolstered by a startup culture can achieve faster turnaround and higher delivery capabilities. • Business model: A FinTech’s product/ solution go-live date should fit with market trends. Strategic positioning will target customers with the most potential demand for the innovation. • Funding: To ensure adequate funding for expanding operations, FinTechs need to establish credibility among potential investors. Efficient working capital management with the right brand traction can help to finance the industrialization of the innovation. For a large organization such as HSBC, it is imperative to partner with startups that have experience navigating within a complex environment. Thus, we usually work with scaleups.” —Adizah Tejani Digital Innovation Lead, HSBC Retail Banking and Wealth Management Capgemini’s scaleup qualification program evaluates FinTech maturity through 360-degree analysis. The program evaluates the maturity of scaleups to effectively collaborate at scale with financial institutions by determining whether the firm has the necessary characteristics for long-term success. Participants are evaluated based on People, Finance, Business, and Technology pillars.42 ( For a who’s who of scaleup program participants, see Figure A3, page 29.) 42 The Capgemini ScaleUp Qualification is a systematic, global and time-effective automated process, leveraging Capgemini’s expertise in Technology, Cybersecurity, Insights & Data, and Consulting to identify and qualify the most-prepared scaleups for efficient and effective collaboration with financial institutions. https://scaleup-qualification.capgemini.com/qualification/process. 22 World FinTech Report 2020 At the same time, banks within the Open X sharing ecosystem must evolve to become inventive banks. The focus of an inventive bank is three-staged, with the first step being platformication or deciding the foundation technology on which to accelerate the design, and build the next generation of banking. Thereafter, a gap analysis can help the bank determine which competencies should be bolstered and then decide which ecosystem players might help to shore up weaknesses – with the end-game intent to provide customers with digital and experience-centric offerings. Finally, an end to end strategy with design, build, and operations expertise can help realize the value of the innovation and deliver at scale (Figure 12). Figure 12: Integrated framework of an inventive bank Inventive Bank Identifies improvement areas and effectively collaborates with other ecosystem players to seamlessly deliver digital and experience-led offerings to customers Effective collaboration maturity Industrialization Acculturation Evaluation Open innovation People Finance Business Technology A structured approach to effective collaboration will exponentially increase the chance of success. Source: Capgemini Financial Services Analysis, 2020. To become inventive, incumbent banks must gauge their current readiness to collaborate at scale compared with global peers. to the four stages of collaboration (Open Innovation, Evaluation, Acculturation, and Industrialization). Capgemini’s Open X Readiness Index, a benchmarking tool, introduced in the World Retail Banking Report 2019, measures where banks stand today in their collaboration readiness (Figure 13). Most banks struggled to build collaboration readiness in the People and Finance pillars, after encountering issues, especially when it came to Acculturation. For additional insights, see Figure A4 of Appendix, page 30. Around 60 banks from across regions have thus far participated in the Open X Readiness Index, with most finding they are far from reaching North Star success. The banks were measured across People, Finance, Business, and Technology pillars, and mapped Analysis of the top 20% of Open X Readiness Index participants offers insight into the inventive bank transformational journey. Structured around four pillars, incumbents can customize and adapt the identified best practices. 23 Figure 13. Collaboration readiness vs. success: Bank perspective (%) 100 33 Outliers North Star 4 11 Dawdlers Race to Nowhere 2 Success of collaboration 75 50 25 0 0 25 50 75 100 Collaboration readiness Americas Note: Europe Asia-Pacific, MEA For detailed methodology, see page 32. Sources: Capgemini Financial Services Analysis, 2020; World Retail Banking Report 2019. What traits help a bank to collaborate effectively? People • A dedicated collaboration team: Collaboration-ready banks (that participated in the Open X Readiness Index) invested in a dedicated and autonomous FinTech collaboration team composed of at least 10 employees with a mix of startup and enterprise collaboration experience. This team can intercede to reduce friction between bank and FinTech stakeholders, particularly during the sometimes sensitive acculturation and industrialization phases. • Intrapreneurship: Top banks encouraged intrapreneurship and offered their FinTech collaboration team timely upskilling on the latest digital capabilities. Driving an innovation culture supported by training and awareness of evolving technologies will help banks to understand and onboard the most-likely-to-succeed FinTech partner. 24 Finance • A fail-fast approach: Open X Readiness Index leaders exhibited financial willingness to adopt a fail-fast approach to innovation. A fail-fast approach helps determine the value of an idea as well as how to quickly pivot to cut losses, which makes it useful when working to industrialize the collaboration. • Monitoring the FinTech field: A majority of banks that gauged the FinTech landscape by investing in hackathons, accelerators, and other mediums reported higher collaborative success. A financed FinTech evaluation phase can help to ensure a suitable fit for a particular business case, be it in the front end, middle or back office. Business • Solution scalability assessment: Collaboration-primed banks engaged with FinTechs World FinTech Report 2020 that offered high scalability. The right FinTech partner and scalable go-to-market solutions helped to industrialize the collaboration to meet targeted business outcomes. • External trusted parties: High engagement with trusted third parties during the collaboration phase was a common theme among the effective collaborators. External subject matter experts and consultants can drive the partnerships to success with their specific know-how of market needs and real-world knowledge of working with diverse dynamics. Technology • Be an early mover: Though risky, successful banks were either earlyadopters or among the early majority of those adopting new technologies – and they reported high technological synergies with FinTechs. Embracing digital transformation by investing in emerging technologies can help to shrink digital chasm in middle- and back-office processes while also making onboarding with FinTechs easier. • Reduce legacy system dependency: Top banks reported medium to low dependence on legacy systems. They moved away from legacy systems into an open and evolutive platform such as based on cloud, which optimized integration with FinTechs from an IT perspective. It also helped to improve operational effectiveness in middle- and back-office processes while continuing to boost CX in the front end. With reduced legacy system dependency, banks can define and deploy new business models that can be replicated leveraging component reusability. Players that collaborate at scale to industrialize innovation will shine within the Open X sharing economy As banks and FinTechs develop collaborative maturity, they will drive innovation across the value chain more effectively. When an Open X-ready bank collaborates with a vetted FinTech scaleup, it can deliver an industrialized and scalable experience. Effective collaboration spurs the transition from an innovationcentric model (open innovation) to a business-focused approach in which the innovative solution is adopted and consumed at scale (applied innovation). The way forward for bank/FinTech survival in the Open X era is applied innovation to scale up operations and leverage partner strengths (Figure 14). Start as a provider but in parallel evangelize how the bank can become a partner that is involved in business cases vs use cases. Propose a model that enables the bank to sell a new service to clients. That is key to ensuring partnership success and sustainability.” —Nicolas Prince CEO, RegData Figure 14: The journey from open innovation to applied innovation Traditional banks Startups Inventive banks Scaleups Open Innovation Applied Innovation Focus on keeping innovation as the primary objective Focus on the targeted business outcomes, as well as the adoption and consumption of the innovation Output Output Proof of concept Industrialize innovation at scale Source: Capgemini Financial Services Analysis, 2020. 25 BBVA leverages applied innovation to bring products to market, lower operational costs, and boost mobile banking Business case: BBVA seeks to retain its leadership standing within the dynamic, increasingly competitive financial services industry. The group aims to be a data-driven and customer-centric organization while also operating efficiently. As BBVA actively explores the FinTech arena, it also focuses on collaborative projects to help drive its core businesses.43 Implementation: With Open X approaching, BBVA effectively played to its strengths by taking up the Supplier role, in its collaboration with Uber, in Mexico. BBVA offers digital bank accounts and other services to Uber drivers and delivery partners via Uber’s mobile app. Linked to the co-branded (Mastercard) international Driver Partner Debit Card, BBVA’s products are, for the first time, operating in a third-party app.44 In another first, BBVA assumed a Financial Aggregator role by offering customers access to products they have with other financial services providers.45 Through this integration, the bank provides customers an overall analysis of their financial health to enrich their engagement. BBVA prioritizes operational efficiency and consistent user experience across regions, just like the BigTechs. BBVA has identified best practices for global products to streamline middle- and back-office processes, speeding up product development. The recognized best practices include standardization of APIs, focus on design and user experience, and the use of data and behavioral economics while following the principles of transparency, clarity, and responsibility. For example, BBVA plans to roll out its biometric digital onboarding process, already available in Spain, to other countries by reusing globally designed components. Veridas, a BBVA joint venture with Spanish startup Das-Nano, helped develop these biometric solutions.46 As the digital onboarding case illustrates, effective collaboration powered BBVA’s inventive banking transformation. BBVA’s dedicated autonomous team, Open Innovation, enables connection with the FinTech ecosystem and has spawned 300+ interactions between entrepreneurs and the bank’s business areas.47 BBVA has adopted a fail-fast approach through its Fast Track program, which facilitates work between identified startups and its business units. As part of the program, pilot tests involving 17 business areas were carried out in 2019 to determine BBVA’s financial readiness for such an approach. BBVA practices applied innovation through scaleup collaboration to industrialize innovative products and services. As business opportunities arise, the bank selects mature FinTech firms most likely to bring BBVA solutions to market. How? Through initiatives such as Open Marketplace, a platform (with more than 2,000 registered startups and 170+ business units) that pairs business cases and suitable partners. BBVA also organizes events such as an Open Talent competition, Open Innovation Acceleration program, and Open Talks that foster discussion about new technologies and support the FinTech landscape. To develop its in-house technological capabilities and boost collaboration, BBVA is entering into strategic alliances. It is working with Intel to develop internal skills in areas such as data storage and processing, using artificial intelligence. Results: BBVA’s global product strategy, featuring reusable code and technology, has helped to reduce the time to market for solutions by nearly 50% while lowering costs by 40%.48 BBVA, “The four pillars of digital strategy,” March 4, 2019, https://www.bbva.com/en/the-four-pillars-of-bbvas-digital-strategy/. BBVA, “BBVA, in alliance with Uber, launches first banking product in Mexico that operates in third party app,” July 2, 2019, https://www.bbva.com/en/bbva-in-alliance-with-uber-launches-the-first-banking-product-in-mexico-that-operates-in-athird-party-app/. 45 BBVA, “BBVA’s roll out of global products and services is delivering real results,” December 10, 2018, https://www.bbva.com/en/bbvas-roll-out-of-global-products-and-services-is-delivering-real-results/. 46 Ibid. 47 BBVA, “BBVA explored collaboration with over 300 startups in 2019,” December 26, 2019, https://www.bbva.com/en/bbva-explored-collaboration-with-over-300-startups-in-2019. 48 BBVA, “BBVA’s roll out of global products and services is delivering real results,” December 10, 2018, https://www.bbva.com/en/bbvas-roll-out-of-global-products-and-services-is-delivering-real-results/. 43 44 26 World FinTech Report 2020 Meanwhile, as a result of match-up initiatives with 300+ startups in 2019, BBVA Open Innovation carried out 16 pilot tests with scaleup participants, with a third of the collaborative projects advancing to the marketing phase by early 2020. What’s more, 38 solutions are in the definition and implementation phases.49 BBVA crossed the 50% digital tipping point in 2019, which means that more than half of BBVA’s customers use mobile banking to engage with the bank. Using a structured approach for collaboration and focusing on operational efficiencies in the middle and back office, BBVA has embraced Open X and is moving toward applied innovation.50 The most important thing now is partnerships – be it with FinTechs or bigger firms or firms operating in other industries – wherever you can find opportunities to share an idea to create experiences jointly. Collaborations are not just win-win; they are win-win-win.” —Carlos López-Moctezuma Global Head of Open Banking, BBVA BBVA, “BBVA explored collaboration with over 300 startups in 2019,” December 26, 2019, https://www.bbva.com/en/bbva-explored-collaboration-with-over-300-startups-in-2019/. 50 BBVA, “BBVA digital highlights from 2019,” December 20, 2019, https://www.bbva.com/en/bbva-digital-highlights-from-2019/. 49 27 Appendix Figure A1. BigTechs – from disruption to maturity BigTechs From strong player in other industries 2004 Ant Financial 2004: Alipay launched (online and mobile payment platform). 2008: Alipay adopted by ~150 mn users with a transaction volume of ~USD100 mn (RMB700 mn). 2007 Amazon 2007: Amazon Pay launched. 2013 Tencent 2014: Apple Pay launched (mobile payment and digital wallet service). 2016: Apple pay adopted by ~70 mn users. 2015 Google 2018 2018: Ant’s money market fund (Yu’e Bao) becomes world’s largest money market fund with USD168 bn AUM. 2019: All of China’s mutual fund managers are on the Ant Marketplace (Ant Fortune) platform that reaches ~180 mn users. 2016 2016: Amazon Pay reaches 33 mn customers in 170 countries; 2X transaction volume from 2015. 2017: Amazon Lending facilitates USD3 bn in loans to 20,000+ SMBs in the US, Japan, and the UK. 2020: In talks with Goldman Sachs to offer small business loans; BBVA piloting to make sales on the platform. 2018 2018: WeChat Pay has 40% market share of China’s 2013: WeChat Pay launched, first-ever QR code and mobile payment market of ~USD40 trn and in-app wallet payment. processing more than 1 bn transactions daily. 2015: ~USD550 bn in payments processed by Wealth management platform (Licaitong’) manages WeChat pay. ~USD88 bn of customer assets. 2014 Apple To mature player in finance 2015: Launch of Android Pay, later rebranded as Google Play in 2018. 2019 2019: Apple Pay processes more than 10 bn transactions and used by ~400 mn users. Apple partners with Goldman Sachs to launch credit card. 2018 2018: Google Pay revenue increases by 92% y-o-y in India. 2019: Expansion to 17 countries with 62 banks supporting the platform. Sources51: Capgemini Financial Services Analysis, 2020; CB Insights 2019; Ant Financial; Amazon; Tencent; Apple, Google. 51 Alipay.com, April 1, 2009, https://www.alibabagroup.com/en/news/press_pdf/p090401.pdf; Retail Dive, February 7, 2017, https://www.retaildive.com/news/amazon-payments-users-hit-33m-transactions-nearly-double/435687; Business Wire, June 8, 2017, https://www.businesswire.com/news/home/20170608005415/en/Amazon-Loans-3-Billion-20000-Small-Businesses; Business Insider, February 27, 2020, https://www.businessinsider.in/tech/news/what-an-amazon-and-goldman-sachspartnership-means-for-wall-street-and-fintechs/articleshow/74015178.cms; Walk The Chat, March 26, 2019, https:// walkthechat.com/tencent-annual-report-2018-stagnating-gaming-revenues-payments-ads-growth; Caixin, March 22, 2019, https://www.caixinglobal.com/2019-03-22/chart-of-the-day-chinas-mobile-payment-transaction-volume-hits-4151-trillionin-2018-101395789.html; CNET, March 25, 2019, https://www.cnet.com/news/apple-reveals-big-numbers; Statista, https:// www.statista.com/statistics/911914/number-apple-pay-users; The Economist, August 22, 2019, https://www.economist.com/ finance-and-economics/2019/08/22/apple-and-goldman-sachs-launch-their-credit-card; Financial Express, October 24, 2019, https://www.financialexpress.com/industry/google-pay-india-revenue-increases-92-to-rs-3-76-crore/1744444; GSM Arena, November 20, 2019, https://www.gsmarena.com/google_pay_expands_availability_in_17_countries-news-40184.php. 28 World FinTech Report 2020 Figure A2. Challenger banks – from disruption to maturity Challenger banks From early-stage market disruptor To solid presence 2014 Atom Bank 2018 2018: Reached 65,000 customers in the UK with 2014: Launched in UK. Value proposition: First digital-only, branchless bank. EUR1.8 bn in retail deposits. 2015 Revolut 2015: Launched in the UK. Value proposition: Prepaid debit card, no-fee currency exchange, no-commission stock trading, cryptocurrency exchange, peer-to-peer payments. 2018 2018: Revenue grows to EUR58.2 mn, from EUR12.7 mn in 2017; 7 mn users with 3.7 mn active users. Further plans to expand to new markets including Singapore, Japan, and the US. 2015 N26 2015: Launched without a banking license. Value proposition: Offers an interface with the back-end run by Wirecard. 2019 2019: ~3.5 mn customers in 24 European markets; ~16 mn transactions per month. Operations across the Eurozone, Switzerland, the US, and plans to move into Brazil. 2016 Starling Bank 2016: Banking licence obtained. Value proposition: Used “data-led insights” to give customers a clear picture of their entire financial situation from a single account. 2019 2019: Hits 1 mn customers mark, including 80,000 business customers. Further focus on expanding services for business clients. Set to achieve EUR1 bn in deposits. 2017 Monzo 2017: Banking license obtained. Value proposition: To build a current account that lives on customer’s smartphone and gives them control of their money. 2019 2019: Reaches 3 mn accounts in the UK with ~EUR4.9 mn in net interest income. Sources52: Capgemini Financial Services Analysis, 2020, Atom Bank, Revolut, N26, Starling Bank, Monzo. Figure A3: Capgemini ScaleUp Qualification – making collaboration effective53 18 2 4 1 5 8 1 10 2 3 3 1 3 3 Atom BankAnnual Report 2018/2019, https://www.atombank.co.uk/~/docs/annual-report-18-19.pdf; CNBC, October 1, 2019, https://www.cnbc.com/2019/10/01/revoluts-losses-double-as-fintech-unicorn-pushes-for-global-expansion.html; N26, July 11, 2019, https://n26.com/en-eu/blog/n26-us-journey-begins-today; Business Insider, November 13, 2019, https://www.businessinsider.com/ starling-hits-one-million-account-milestone-2019-11?IR=T; Monzo, September 16, 2019, https://monzo.com/blog/2019/09/16/threemillion; MonzoAnnual Report 2019, https://monzo.com/static/docs/annual-report-2019.pdf. 53 https://scaleup-qualification.capgemini.com/scaleups. 52 29 100 3 4 75 50 25 0 1 2 1 0 25 50 75 Success of collaboration Success of collaboration Figure A4: Collaboration readiness vs. success: Bank perspective (%) across People, Finance, Business and Technology pillars 100 3 75 50 25 1 0 100 25 0 3 4 75 50 25 0 1 0 2 25 50 75 100 100 Note: Europe Asia-Pacific, MEA 1 2 100 75 4 3 75 50 25 0 Collaboration readiness with finance Americas 50 Collaboration readiness with technology Success of collaboration Success of collaboration Collaboration readiness with people 100 4 1 0 2 25 50 75 100 Collaboration readiness with business Dawdlers 2 Race to Nowhere 3 Outliers 4 North Star Based on survey participation by 59 banks. 1. Dawdlers: Unpreparedness in readiness a key reason for not being successful 2. Race to nowhere: Banks having overall readiness but did not achieve success 3. Outliers: Exceptions, where collaboration success was achieved without substantial efforts on overall readiness 4. North Star: High preparedness in overall readiness a key reason for achieving success Sources: Capgemini Financial Services Analysis, 2019; 2019 Retail Banking Executive Interview Survey, Capgemini Global Financial Services. 30 World FinTech Report 2020 31 Methodology Scope and research sources The World FinTech Report 2020 draws on research insights from the 2020 Global FinTech Executive Interviews and the Capgemini Open X Readiness Index. 2020 global FinTech executive interviews The 2020 edition of the report includes insights from focused interviews with senior banking executives of leading banks across regions. Capgemini Open X Readiness Index The Capgemini Open X Readiness Index evaluates banks based on 98 data points to judge banks on their collaboration readiness across four pillars – People, Finance, Business, and Technology. Each parameter was assigned appropriate weightage, and final scores were mapped on a scatter plot (by rebasing score on 100). We represented banks’ view of readiness to 32 collaboration on the X-axis (overall and for individual parameters), and on the Y-axis, we have banks view on their collaboration success. We took the average of the top 20% banks as a point of readiness and consider an overall score of 70 as a benchmark for collaboration success. Key definitions: 1. Dawdlers: Poor or insufficient preparation/ readiness contributed to mediocre success. 2. Race to nowhere: Banks that had overall readiness but did not achieve success. 3. Outliers: Exceptions, firms that achieved success without substantial collaboration readiness. 4. North Star: Banks that were highly prepared and ready for collaboration, were most likely to attain success. World FinTech Report 2020 33 About Us A global leader in consulting, technology services, and digital transformation, Capgemini is at the forefront of innovation to address the entire breadth of clients’ opportunities in the evolving world of cloud, digital, and platforms. Building on its strong 50-year heritage and deep industry-specific expertise, Capgemini enables organizations to realize their business ambitions through an array of services from strategy to operations. Capgemini is driven by the conviction that the business value of technology comes from and through people. It is a multicultural company of almost 220,000 team members in more than 40 countries. The Group reported 2019 global revenues of EUR 14.1 billion. Visit us at www.capgemini.com. Capgemini’s Financial Services Business Unit offers global banks, capital markets firms, and insurers transformative business and IT solutions to help them nimbly respond to industry disruptions, to give their customers differentiated value, and to expand their revenue streams. A team of more than 60,000 professionals collaboratively delivers a holistic framework across technologies and geographies, from infrastructure to applications, to provide tailored solutions to 1,000+ clients, representing two-thirds of the world’s largest financial institutions. Client engagements are built on barsetting experience, fresh market insights, and more than a quarter-century of global delivery excellence. Learn more at www.capgemini.com/financialservices A global non-profit organization, established in 1971 by banks and insurance companies, Efma facilitates networking between decision-makers. It provides quality insights to help banks and insurance companies make the right decisions to foster innovation and drive their transformation. Over 3,300 brands in 130 countries are Efma members. Headquarters in Paris. Offices in London, Brussels, Andorra, Stockholm, Bratislava, Dubai, Milan, Montreal, Istanbul, Beijing, Tokyo, and Singapore. Visit www.efma.com ©2020 Capgemini All Rights Reserved. Capgemini and Efma, their services mentioned herein as well as their logos, are trademarks or registered trademarks of their respective companies. All other company, product and service names mentioned are the trademarks of their respective owners and are used herein with no intention of trademark infringement. No part of this document may be reproduced or copied in any form or by any means without written permission from Capgemini. Disclaimer The information contained herein is general in nature and is not intended and should not be construed as professional advice or opinion provided to the user. This document does not purport to be a complete statement of the approaches or steps, which may vary accordingly to individual factors and circumstances necessary for a business to accomplish any particular business goal. This document is provided for informational purposes only; it is meant solely to provide helpful information to the user. This document is not a recommendation of any particular approach and should not be relied upon to address or solve any particular matter. The text of this document was originally written in English. Translation to languages other than English is provided as a convenience to our users. Capgemini and Efma disclaim any responsibility for translation inaccuracies. The information provided herein is on an as-is basis. Capgemini and Efma disclaim any and all representations and warranties of any kind. 34 World FinTech Report 2020 Acknowledgements We want to extend special thanks to all the banks, insurance firms, wealth management firms, payments service providers, FinTech firms, and individuals who participated in our executive interviews and surveys. The following firms agreed to be publicly named: Banks – Abu Dhabi Islamic Bank; Akbank; Al Ahli Bank of Kuwait KSC; Alfa-Bank Kazakhstan; Arkéa; AYA Bank; Banca Widiba; Banca Sella; Banco Bradesco SA; Banco Interamericano de Finanzas; Banco Interamericano de Finanzas [BanBif]; Bancolombia; Banco Sabadell; Banesco USA; Bank Leumi Le-Israel LTD; Bank Leumi Le-Israel; Bank of Africa; Bankinter Consumer Finance; Bank Pekao; Belfius; BNP Paribas; BPER Banca; Bulgarian American Credit Bank; S.A.; Caixa Geral de Depositos; Canadian Imperial Bank of Commerce; Catholic Syrian Bank; Citigroup; Credem; Crèdit Andorrà; Credit Libanais; Danske Bank; DBS Bank; DenizBank A.S.; Discount Bank; Emirates NBD; FE CREDIT; Fidor Bank AG; FirstBank Puerto Rico; Government Savings Bank; Gruppo Bancario Cooperativo Iccrea; HSBC; ING; Intesa Sanpaolo; Isbank; Israel Discount Bank; Kasikorn Bank PCL; Kuwait Finance House; Kuwait International Bank; Laxmi Bank Limited; Lloyds Banking Group; Mashreq; Mauritius Commercial Bank; Millennium BCP; Mobilink Microfinance Bank Limited; MUFG Bank; National Bank of Greece; Nlb Banka Beograd; Nordea Bank; Nordnet; OTP Bank (Romania); Piraeus Bank S.A.; PT. Bank Danamon Indonesia, Tbk; “Priorbank” Joint Stock Company, Punjab National Bank (International) LTD; Prince Bank Plc; Raiffeisen Bank International; Raiffeisen Bank Kosovo; RHB Bank; Santander Consumer Bank S.A.; Sasfin Bank; SEB; Self Bank; Standard Chartered Bank; Starling Plc; Swedbank Latvia; Taunus Sparkasse; Terabank; Türk Ekonomi Bankası; Türkiye İş Bankasi; United Bank for Africa; Virtual Bank by Standard Chartered, Zemen Bank S.C. FinTech Firms – Active Asset Allocation; Additiv; Asaas; Axyon AI; BankBuddy.ai; Billpocket; Blockpit GmbH; Bsurance GmbH; Canopy Pte Ltd; Confrim U; Connective; Corduro, Inc.; Cover Genius; CredoLab; Deus Technology; Edebex; Etronika; Ezbob; Family Finances; Finnovest; Finopz Ltd; Finovera, Inc.; FLUO; GetSwish AB; HyperPay; Ixaris; JaldPay Private Limited; Leveris; LIFEdata; Lodex; MyDataBall; Particeep; Payment Components; Progressa; RegData; SAS; Simple, Tic:Toc; Uanbai; and Virtual B SpA. We would also like to thank the following teams and individuals for helping to compile this report: Elias Ghanem, Chirag Thakral, and Vivek Kumar Singh for their overall leadership for this year’s report; Anand Kumar Singh, Susovan Dwivedy, Vaibhav Pandey, Tamara Berry, Dinesh Dhandapani Dhesigan, and Oleksii Dakal for researching, compiling, and drafting the findings, as well as providing in-depth market analysis. Capgemini’s Global Banking network for providing their insights, industry expertise and overall guidance: Anuj Agarwal, Bhuva Subramaniam, Colin Payne, Clement Lacroix, Daniel Fuente Montes De Oca, Florian Wahl, David Brogeras Julian, Isabelle Andreasson, Jerome Buvat, Kristofer le Sage de Fontenay, Mark Griffin, Nicolas Descours, Nilesh Vaidya, Olivier Jamault, Sankar Krishnan, Seddik Jamai, and Sudhir Pai. Ken Kundis, Marion Lecorbeiller, Mary-Ellen Harn, Aparna Tantri, Ashley Munoz, Jyoti Goyal, Martine Maître, Sai Bobba, and Suresh Papishetty for their overall marketing leadership for the report, and the Creative Services Team for producing the report: Kalidas Chitambar, Suresh Chedarada, Sourav Mookherjee, Pravin Kimbahune, and Jagadeeshwar Gajula. Vincent Bastid, Hannah Moisand, Anna Quinn, and the Efma team for their collaborative sponsorship, marketing, and continued support. 35 Visit www.FinTechWorldReport.com For more information, please contact: Capgemini financialservices@capgemini.com Efma info@efma.com For press inquiries, please contact: Mary Sacchi (North America and the Rest of the World) WE Communications for Capgemini Tel.: +1 (212) 551- 4818 msacchi@we-worldwide.com Bartu Sezer (EMEA) WE Communications for Capgemini Tel.: +44 (0) 20 7632 3861 bsezer@we-worldwide.com Mary-Ellen Harn (Capgemini) Tel.: +1 704 356 7996 mary-ellen.harn@capgemini.com Anna Quinn (Efma) Tel.: +33 1 47 42 67 71 anna@efma.com
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Implementation of Fintech in Global Firms for Financial Opportunities

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Fintech is derived from "Financial Technology," where the term is used in describing the
new technology that targets to improve the financial services and upgrade and automate the
delivery. It is used in aiding in the management of the financial operations, procedures, and lives
of the business owners, companies, and consumers via the specialized algorithms and software on
their smartphones and computers. This technology is highly recommended in a business's
operation that goes global. The upper hand of using this technology is that it allows for a wider
reach and better services. Companies that go global take their fintech technology advancements to
ensure that the move is successful and the data and finances are in their secure and profitable
chances. Since the introduction of fintech, the competition in the financing sectors has rapidly
improved their game, making the competition tighter. This competition requires the businesses to
upgrade and integrate with open X, where there is a chance for competition.
Several capital-budgeting boosts are available to ensure the businesses' success; several
budgeting apps help financial management. These apps ...

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