Fintech - How Big Banks Drive Innovation

foreign hello good morning everyone or actually it is noon now so we are running a little bit late but thank you so much for joining us today as part of as you know fintech every day because many years in the making and we are now so excited to have it be part of the larger the bigger the better Abu Dhabi Finance week now after having just had radio wonderfully insightful panel on investing let's kind of switch the focus and really look at the role of banks within the Innovation landscape now my name is Gabriel zarillo I am a financial regulator here at AGM and I'd like to introduce our panelists for this session now closest to me I have rahil Ahmed CEO of rockback radio I'm afraid you're going to get the short end of the stick when it comes to introductions simply because rackband is such a well-known consumer can you have a look at that yeah thanks now here we have been Rutan CEO of one connect International now one connect is an International Financial technology services company that provides solutions for banks however not be fooled one connect products can be found in almost every Bank in China and is listed on the New York Stock Exchange so maybe a name to remember and furthest for me but definitely not you know won't be forgotten we have the CEO of UAE trade connect UA trade connect is a document clearing exchange system that is led by a Consortium of 10 Banks in the region and is a subsidiary of e and which is formerly the etisalat group so also an English you guys should remember all right let's get started so the title of our session is how big Banks Drive Innovation which might seem like a little bit of an interesting title for you guys because do big pranks Drive Innovation really we tend to talk about how banks are these slow these you know dinosaurs stuck in the past that financial institutions that infrastructure players are just fundamentally slow and maybe a little bit boring and they're struggling to keep up with the pace of change and worse than that they're dragging Nimble players down so my very first question and I'm going to ask for heal to jump into it is is that still the case has this changed at all what is the current state sure uh thank you very much pleasure to be with all of you so I think uh I would say that that view is slightly outdated banks are rapidly innovating but we are in the business of trust I heard somebody in the previous panel talk about trust right at the end of the day we deal with people's money and we are a custodian in many respects shape and form so you have to deal with Innovation with the level of security level of trust that you need however having said that I think most banks have a very large surface area as well we don't sell select our customers we don't sell select other employees because we have been in this business for many hundreds of years since the financial system came into being uh but we are rapidly uh rapidly changing our Tech our architecture data architecture there's a lot of open API stores many banks have now where you can ingest uh other people's Services you can go and be part of somebody else's ecosystem and you are seeing more and more of that so I think the notion that banks are slow banks are Behemoth I think is is is not right in my humble opinion I don't talk only for ragbank I was with Barclay as I was with Standard Chartered with City some of the big Global players and the banks are doing a lot but we are also at the same time dealing with lots of different types of customers we deal with a huge amount of Regulation and we deal with cyber security and other many things as well so you have to balance where you invest your Finance capital and resources and what is the most important thing so I go back to the fundamental notion of the trust with the customer and being custodians of their money is the most important thing for a bank that cannot be broken anything else comes after that I like how you did the little dig at us you know oh it's all the financial Regulators fault actually no but very very true Zuul I'm going to jump over to you because I hope I hope as you know as part of a concern team is that overseeing that that you see the best face of banks is that the case or is it squabbling yeah I would say so I think uh what rahil was saying is absolutely true Banks are no different to any other industry in the sense that they have to compete and they have to develop and they have to evolve however there is a little bit of a drag because of the fiduciary responsibility so that being said I think banks particularly large banks are in an enviable position because they can follow different modes of evolving they can follow different methods of of innovating so for example there can be some product development in-house they can be in the largest of the banks they can take best of breed from different markets and adopt it in certain markets and then of course there is what what binru will tell us about which is how to partner up with with fintechs and to adopt the best or the most current thinking from fintechs the model that we've adopted here in UAE which has been quite successful is by pulling together a Consortium of banks to deal with a very specific problem which led to the foundation of a platform the pla the platform has one use case on it at the moment but it is a platform which will allow us to build more use cases and the reason this has been particularly successful is because by bringing Banks into the equation at the beginning you don't get the problem of not invented here you don't get the disputes about well if this was innovated by Fab should rack Bank actually be part of it or if this was developed by enbd should Marsh Rick be part of it actually if people come together as equal Partners right at the beginning you end up solving the issue of of whose product is it and that leads to what we've found to be very very useful which is very high levels of adoption so I think if we look at Banks and where they come from the best banks will be the ones that use a combination of different Innovation methods actually remember if we're still using this term or if it's horrendously outdated but you just reminded me of um it was I think it was trending in 2019 or 2020. the the term coopetition suddenly it was being used everywhere they're like we we are cooperating but we're competing really so it's a little bit like that but we use a better term which is co-creation okay co-creation is really about who are the different players in our ecosystem so we've got Banks providing domain knowledge they're providing first-time knowledge about the problem related to fraud and money laundering and duplication of financing and then you've got the technologists who bring into the picture the cyber security element the cloud element the artificial intelligence to be able to create a solution that solves the problem so co-creation is the way we use this word I like it back to the basics ideation co-creation execute Fusion my next one is for you okay so stay with me now a lot of players want to get into the space um they drink being this you know deep sea player direct to consumer that they want to disintermediate everybody they want to go after the big guys they want to be that big player that isn't selling their products to anybody the reality is that a number of financial vendors or startups anyone really selling their products is actually really doing B2B finally they're doing B2B they're doing even B to B to C white labeling their products so in inst ecosystem who actually needs who is it the startups and vendors who need the banks or is it vice versa and I asked that of you binary because evidently with one connect you've been very aggressively implanting your products within a number of banks so please tell me who needs who yeah I'm not sure whether is it or who needs who uh question you know if you look at the fintech ecosystem in Southeast Asia in Singapore particular it has grown a lot from 2018. we had a hundred fintechs in 2018 and then last in 201 we had about 800 fintechs in the Singapore fintech Association but it has then kind of slowed down from 2020 I guess yes reach a bit of a saturated but from day one you split the syntax into three categories the first category is the one that wants to be a bank and compete with Ahmad here and the other category is the ones that want to build up their own b2c business right and I think that that area is the one that is kind of saturated in the payment space and then the last set are one connect type of fintech that we only service financial institutions as a whole it may be a new bank it may be a traditional bank but we provide technology so one connect with the fintech arm of ping and group our parent company is also a bank in China and we strive to take the best of what is invented or researched in China out for Southeast Asia and the reason is very simple because only the large banks will have r d power to build their own Solutions and in a mid-sized Bank in China it's about the largest size banks in Southeast Asia so large part of Southeast Asia banks will prefer to collaborate rather than to build on their own with exception of a few I also mentioned that I think the trend has always been that collaboration is from day one it's just who starts first we saw that the Challenger Banks maybe between position number 7 to 15 they will start the collaboration first and we started from the onset increasingly we're seeing more and more collaboration definitely the decision cycle is also getting shorter and shorter so I I think collaboration had from day one has kind of really matured that's why this thing about Banks being slow I would say has changed a lot in the last five years yeah very nice yeah so I mean all decisions we take oops all decisions we take are we always consider build by partner right so that's part of our ethos we are deconstructing the bank into services and then we look at which service is best provided by either building in-house and what is our core competitive Advantage versus what our services that we go and partner with the companies like oneconnect or other companies and we have a lot of fintech that we have Partners both here in the UAE and in my previous job in Barclays a huge amount of collaboration cooperation uh competition whatever you want to call it so I I have personally never seen fintechs as competition right um the other thing I think which is very important is that the decision Cycles in Banks is also getting much faster and the type of skill sets we are doing so technology in the past and most big Banks were sort of you know left on the side now the engineers and the product managers are working together right so it's it's become a very different ecosystem uh and I agree with binrude that uh you know we all have to cooperate and partner and that's very much in the ethos of ragnac so stay with me for this next one okay so when do you decide that you need to do your own r d yeah so my as I was saying fundamentally you have to Define what is your core competitive advantage and I think that is where you don't Outsource you don't partner you build and you keep your IP every company has the same thing right I mean if you're an airline you will have your own IEP right and that IP can be your customer experience right you don't have to have your own planes you don't manufacture your own food you don't manufacture your own movies but you still have an IP so for us the competitive Advantage remains with us right now I would say that customer intelligence and personalization is our IP that we want to keep very closely guarded and in-house everything else we partner with people and as I said we have now deconstructed the company into a set of services so that uh you know they are easily identified as to as to what you can do with whom there's only so much I claim on you know lending and certain Financial products that are very much copied over from one or another that are similar if I can take a shot I've got a question on R D the question is not whether the bank which part the bank should do their own r d the question is um that you should understand all the tech that you're implementing whether is it yours or not you know ultimately there are a lot of things out there in the market that's maybe not worth doing r d on your own but Banks should never adopt a solution that they don't have control or don't have understanding to replace to enhance and upgrade right I think that's the key thing keeping the talents within the bank to understand what you have implemented that's key yeah so we've heard about IP we've heard control do you want to add to that uh so I won't use UTC as an example because UTC came together for a very specific reason and and it's not a question of who needs who an analogy from the Telecom space my parent company so if you think about the app store for Apple the App Store is a very important place because it allows access to a billion customers in the iOS environment but who needs who well it's a king maker almost right precisely but without the apps is the App Store worth anything and without the App Store how will the apps get out to the to the to the to the World At Large so if we look at that um if we look at that uh that analogy I think the word that comes to mind is symbiosis because you you can't have one without the other and the other is enriched because of the other one so I think it's a virtuous cycle and it's not really a case of who needs who it comes back to my earlier point of there are different modes of innovation and in this particular area of partnership and and creativity it does make sense that the different players respect the roles of the different parties involved very nice no that's that's a very good point so we're absolutely not discouraging anyone from going out there and launching their startup or their or their vendor or such we're telling them go go and you will find clients if you have a good products okay that's good to know I think one question we do want to we want to touch upon before the end of this panel is a question that is it's kind of pushed around and dallied forward but it's the question of culture right we we often talk about how culture is a key strength in in companies regardless of which industry we mentioned the App Store just now it's in case for some very Innovative banks that are well known or particularly aggressive how do each of you in your own organizations because you're all in leadership positions you know very how how do you promote that culture internally of innovation we're here please I think culture is a challenge for all companies Rachel I wouldn't say it's a it's a challenge for some and not a challenge for others you see the turnover the the the the workforce of the future the workforce of today wants very different things from life right and uh the brand loyalty generally is is in Decline um culture also comes I think binru said this is the how educated and how up to date the people who are making decisions are with what's going around in the world so all the way from your board education to reverse mentoring and to decentralizing decision making but decentralizing them and pushing enabling people while making them think I go back to my first point of this is the customer's money it is their trust so be as Innovative as possible but don't lose the trust right and then naturally you have regulations I always I sometimes say banks are technology companies with the balance sheet and a regulator right that's that's all we are but we have to make sure that that balance sheet and the regulator is also at the heart of any Innovation we do so a lot of uh uh and and we are trying to grow our own Talent base to become more Innovative in very different ways as opposed to always trying to hire from the outside as well it comes back to your point on self-selection yeah right binru yeah I you know in in pingan we believe that you need domain knowledge in order to do the work so it cannot be that a fintech company doesn't speak the language of the banks uh to able to to be able to sell them anything you need to speak their language and understand their pain points well right so one connect we started with 50 from Penang bank and 50 from the big tech companies yeah so that it creates a blended culture it wasn't easy uh our chairman Peter ma said that it is very tough because it's like hiring lands from weekly calls the bankers Lambs because they are they need to be prudent they need to be careful they're taking care of public money right and then he calls the Technologies wolves right and they're hungry they're aggressive and so this this culture blend of lambs and wolves uh takes years of storming and numbing in order to get there and I think for one connected today we have kind of a lot of job rotations because we have half Bankers Half Technologies so it's coming to settle nicely a group of people who knows the customers that they serve so Gabrielle I know what you're hoping for you're hoping that somebody on this panel will draw a distinction between the the rather stayed and boring and slow culture of a bank versus the more aggressive and fast-paced culture of fintech that's what you're hoping for deep down right I I'm a financial regulator but two years ago I was BC so I'm the worst example of that so I I think it's I think it's different to that I think that there are incredibly Innovative people in the banking in the banking world and I think that however I want to cut you on that because yes they're incredibly Innovative people and but I also felt in the last in a lot of years a lot of those people chose to leave the bank to do their Adventures elsewhere okay that's a good point but I would put it to you that's a cyclical thing okay so at cybos this year there was a really good panel which is the the the the the banking Conference held uh by switch there was a really good panel in which they were talking about how the last three or four years has been the pendulum has swung towards fintechs and this year because asset prices have fallen so much funding has dried up it's an excellent opportunity for banks to take to seize the occasion and take the lead in either these Partnerships or in product Innovation generally and which is a very interesting point and I think actually what you'll find and maybe rahil would like to comment on this I think the brightest people who went away into the fintech world lured by options Etc will be rushing back to Banks because a they have the platform they have the customers B they have the depth and they have the research and deployment funds as well as the ability to move into a large space very quickly and I think this is the big advantage of having of a bank being in the driver's seat rather than a fintech being in the lead just because of product Innovation so coming back to your question about culture I think actually the pendulum is swinging back and I would come back to say that banks are innovative especially now that they've had a bit of a wake-up call over the last few years about how things have digitized we've seen so many panels here today about our digitization we had his Excellency uh Mr algor talking about what percentage of transactions are initiated digitally and it's changed the mindset it's changed the entire Paradigm has changed so if this conference was happening three or four years ago it would be a different mindset today it's a different mindset I dare say in a year it'll be a different mindset well if I'd been doing this panel three years ago I would have been ripped jeans so that's an indicative we're here would you like to make closing comments on this is the pendulum swinging back I totally agree I I think that uh the banks now have capacity to hire a lot of the fintech talents definitely yeah yeah I I just uh keep saying this and I maybe the the odd one out the almost pitch fintechs and bank as two separate parts of an ecosystem that are competing with each other I don't see it that way you go to UK look at the all the new banks that were granted license and look at their Senior Management teams it'll be a mixture of very seasoned bankers and uh very Innovative people and I think regardless of whether you are in a fintech or in a bank you need a mix of both at the end of the day you will have shareholders who may be enamored with lots of new customers just now but at some point they will say give me some return for my money right when that happens or you become so big that the regulator says okay now can we come and talk to us because you've become systemically important you will need a mix of mix of both so I think the culture is a is a factor and talent is a factor of the of where you are in the company's life cycle and uh I I think both will need both wonderful Azul binru raheel thank you so much ladies and gentlemen you heard it here the fintechs are coming home thanks