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BANKING + FINTECH: A COLLABORATION FOR GROWTH

© 2018 Digital Banking Report. All rights reserved. PAGE 1

ISSUE 253//DECEMBER 2017ISSUE 255//APRIL 2018

Banking+Fintech: A Collaboration

for Growth


for Growthin collaboration with

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BANKING AND FINTECH

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Copyright 2018: DIGITAL BANKING REPORT (ISSN 2375-3455) is published by DBR Media LLC, 8803 Brecksville Rd., STE 7-223, Brecksville, OH 44141, USA. Phone: +1 (216) 218-4257 [email protected]

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Publisher: Jim Marous, [email protected] Director: Carol Ann RyanDigital Support: Jim BoothSales: Geoffrey Rucinski

WARNING: Federal copyright law prohibits copying or distributing this report in part or in its entirety. (© 2018) This report is licensed for ONE PERSON unless a multi-user subscription has been purchased. Contact [email protected] for additional licenses.

In the future, we will see more banks and fintech firms working together on innovation projects. Legacy organizations are finally warming up to the idea that they don’t have to invent everything in house, and that the network effect can be very valuable for digitally-based financial innovation projects. Professionally managed consortia will allow more institutions to make up lost ground on the innovation leaders.

— JP NicolsManaging DirectorFintech Forge



Contents Letter from the Publisher | 4 |

Summary of Marketplace Examples | 6 |

Executive Summary | 10 |

The Evolving Bank Ecosystem | 19 |

Rationale for Banks + Fintech | 31 |

Banks + Fintech by the Numbers | 40 |

Successful Fintech Strategy Components | 50 |

Marketplace Examples | 62 |

Conclusion: The Future of Platformification | 70 |

About the Author | 74 |


The vast majority of legacy banking organi-zations have a concern regarding the loss of revenue to financial technology companies in areas such as payments, money transfers and personal loans. The amount of business at risk has been estimated to be as high as 25% in lost revenues. This is made more likely since 30% of consumers plan to increase their usage of nontraditional financial service providers in the future.

In response to this threat, more than 8 in 10 traditional financial organizations have stated a plan to increase collaboration with fintech companies in the next three to five years. Simi-larly, almost half of financial services firms are planning to acquire fintech startups over the same period.

The rationale for collaboration is clear. Fintech startups realize that it takes more than a great solution to attract a scalable customer base. To reach beyond early adopters and the tech-savvy takes massive amounts of capital for promotion and product support.

Alternatively, legacy banking organizations struggle to keep up with consumer expecta-tions. Organizational size and structure (silos) and even traditional leadership styles hamper the ability to deliver the new digital solutions consumers receive from other industries. Partnering with a fintech startup alleviates some of these issues, allowing the established

Letter from the Publisher

DIGITAL BANKING REPORT Jim Marous, Owner and Publisher [email protected] 8803 Brecksville Rd., STE 7-223, Brecksville, OH 44141 (216) 218-4257

Issue 255 Cost $495

SUBSCRIPTIONS: $1,995 per year for digital edition and online access $3,495 for teams of 10 $9,995 for enterprise subscriptions

WARNING: Federal copyright law prohib-its copying or distributing this report in part or in its entirety. (© 2018) Contact: [email protected] for reprints.

organization an opportunity to keep pace with marketplace demands.

The question is whether these new partnerships can successfully preserve the culture of the fintech provider, while allowing legacy banks to be the hub of the consumer’s financial relationship? This report is not intended to provide a review of all of the fintech organizations in the marketplace. Instead, this report is a view of the quickly changing banking ecosystem.

We would like to thank Microsoft for their partnership and sponsoring the Banking + Fintech research report in collaboration with Efma. Their partnership has enabled us to create an in-depth review of the competitive landscape and to better understand the impact across all components of the financial services ecosystem.

Going forward, fintech firms and legacy banking organizations can both benefit. The combination of digital product design and innovation with vast distribution and estab-lished infrastructure is compelling. Most importantly, the consumer stands to benefit most of all in the future.

Enjoy!

Jim Marous Publisher, Digital Banking Report


BANKING AND FINTECH

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DIGITAL PAYMENTS AND MOBILE WALLETS

© 2017 Digital Banking Report. All rights reserved.

ISSUE 252//NOVEMBER 2017

Digital Payments and Mobile Wallets

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Guide to Digital Lending

Guide to Digital Lending



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for Growth


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PAGE 6

Summary of Marketplace ExamplesThe following is a list of marketplace examples that are described near the end of this report. Some of them are compliments of the Efma Accenture Distribution & Marketing Innovation Portal.

Institution Product Banks + Fintech Innovation

TD Bank (Canada) MySpend A collaboration between TD Bank and Moven to develop a next-generation mobile expense tracking app. The result of this partnership was MySpend, a mobile, real-time expense tracking and money management app, made available to TD’s Canadi-an customer base.

Bradesco (Brazil) Field Control Field Control is an online interaction between service providers and internal customers of the organization (Bradesco’s branches and depart-ments) delivering information about real-time services and reports per type of service, company or region.

Isbank (Turkey) Charity Box A fintech innovation that provides a chance to donate spare change to the charity of the card holders’ choice with every Isbank debit/credit card purchase.

Israel Discount Bank (Israel)

Open API Platform

The first open API banking platform implementation in Israel – a collaboration between IDB and iCount (a leading SME on-line accounting and management system) that provides SME’s with the ‘big guys’ management tools.

Akbank (Turkey) Salary Payment Integration open APIs

Akbank aimed to provide SME customers solutions for their daily operations to help them increase their efficiency. Akbank built partnerships and integrations with fintech firms and start-ups which offered value-added digital solutions focusing on SMEs pain points.

Van Lanschot Microsoft Azure Mobile-first, web-based client platform to access a variety of data and services from across Van Lanschot’s offerings, including transaction and account overviews, personal data, asset management insights, direct communications with bankers, and more.

Goldman Sachs (United States)

Marcus Marcus by Goldman Sachs is only 2 years old, but is already showing the potential of a strong Banks + Fintech strategy. Using open banking APIs andaggressive acquisition of fintech start-ups, theyare becoming a larger player for deposits andloans without opening a branch.




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More than 2.7 million Norwegians pay for just about anything with the Vipps mobile payment app. In fact, they don’t just send you money in Norway anymore; now they Vippse it to you.

With that kind of success, the company—also called Vipps—had to be ready to scale and innovate, so it uses Microsoft Azure to power and scale its app into a globally com-petitive offer-ing. With Azure, Vipps can scale for success, innovation, and value, while it transforms payments in Norway.

“We think mobile payment will be the new normal in Norway within one or two years. Azure is helping us make it possible.”Rune Garborg Chief Executive Officer Vipps

People everywhere have to pay for just about everything. They order things online, make purchases in stores, and split up lunch checks with friends. They move all that mon-ey around in any number of ways.

Six of every ten Norwegians Vippse – more than 400,000 times onan average day. Vipps holds 98%brand awareness in Norway, andalmost every bank in the countrysupports the app. And, Vipps onlylaunched in mid-2015.

Partnering to Build a Powerful P2P Solution

A Strong Partnership and Accelerated Innovation

The Vipps app was originally devel-oped and launched by DNB, one of the leading savings banks in Norway. DNB initially ran Vipps with a monolithic architecture in its own on-premises infrastructure.

By the end of 2015, the app had more than a million users, and by 2017, it had left all its regional com-petitors far behind. To keep pace with its own success – and compete with global mobile-payment players – DNB partnered with 106 otherNorwegian banks to launch Vippsas an independent enterprise. Thenew company immediately began torebuild the Vipps mobile app for amicro service-based cloud architec-ture using Azure.

“We turned to Azure to scale Vipps for users and transactions, ac-celerate innovation, and expand our product,” says Thomas Wold Johansen, Chief Technology Officer at Vipps.

An Advanced Cloud Platform and New Customer Services

Vipps initially migrated its application infrastructure directly to vir tual machines in Azure. To upgrade its data structure and get the most out of Azure services, it also migrated from Oracle to Azure SQL Database It then began using Azure API Management to publish Vipps microservices to internal developers along with partners and merchants.

“It was essential for us to main-tain business momentum while we scaled up,” says Johansen. “We

were able to do both by working with the expert Microsoft cloud team in Norway and the mature, flexible, and powerful Azure plat-form.”

The company uses Azure Notification Hubs for push alerts, Azure Cosmos DB to support Vipps chat, and Azure Active Directory for authentication and access control. By November 2017, the company hosted all core Vipps services on DC/OS clusters in Azure Container Service.

Consumers expect free peer-to-peer (p2p) payment, so to drive revenue, Vipps is using Azure to help launch new paid services for merchants and e-commerce vendors, such as bank-agnostic instant payment, online payment, account payment, Vipps invoice service, and reporting tools based on Microsoft Power BI.

“Last year, Vipps p2p transactions increased 75%, but paid transac-tions grew more than 300%,” says Johansen. “As merchants continue to see more sales with Vipps, we will use Azure and Power BI ana-lytics and reporting to help them generate more business insights.”

Scale, Success, Innovation, and Value

By using Azure, Vipps has struc-tured its mobile app to accom-modate its expected growth. It’s building a digitally native company positioned to compete and win on a global scale. Vipps developers can



easily build and share new APIs and get new services to merchants and consumers quickly. With unlim-ited scalability and a global Azure presence, Vipps can meet almost any demand—in Norway or any-where else.

“With Azure, we can scale Vipps as it grows and streamline future de-velopment, upgrades, and innova-tion,” says Johansen. “That allows us to focus less on operations and more on building new services, creating value, and competing effectively.”

A New Verb, for a New Way to Pay

With the power of the cloud, Vipps might just replace credit cards, debit cards, and cash in Norway. Already, Norwegian diners can Vippse their order, eat, pay, and get a digital receipt—without ever bothering a waiter.

Team Norway fans can Vippse their hockey tickets instantly. Shoppers

at pop-up stores can Vippse if they don’t have cash, and if Norwegian online shoppers don’t like card numbers, expiration dates, or se-curity codes, they can Vippse their purchases instead.

“We think mobile payment will be the new normal in Norway with-in one or two years,” says Rune Garborg, Chief Executive Officer at Vipps. “Azure is helping us make it possible.”

“It was essential for us to maintain business momentum while we scaled up. We were able to do both by working with the expert Microsoft cloud team in Norway and the mature, flexible, and powerful Azure platform.”

Thomas Wold Johansen Chief Technology Officer Vipps



About the AuthorNamed as one of the most influential people in banking and a ‘Top 5 Fintech Influencer to Follow’, Jim Marous is an internationally recognized financial industry strategist, co-pub-lisher of The Financial Brand and the owner and publisher of the Digital Banking Report. The Digital Banking Report is a subscription-based publication that provides deep insights into the digitization of banking, with over 175 reports in the digital archive available to subscribers.

As a sought-after keynote speaker, author and recognized authority on disruption in the financial services industry, Marous has been featured by CNBC and CNN, Cheddar, The Wall Street Journal, New York Times, The Financial Times, The Econ-omist, The American Banker, Accenture and the Irish Tech News and has spoken to audiences worldwide. Jim has also advised the White House on banking policy and is a regular contributor and guest host for the Breaking Banks podcast.

You can follow Jim on Twitter and LinkedIn or visit his professional website.

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