Q&A: Delta Capita’s Trevor Belstead on platform banking, industry trends and growing brand value

“For banks to stay relevant they need to address digital in a holistic approach”

by | June 11, 2021 | bobsguide

As the banking industry becomes more customer-centric and digitalised post-pandemic, so will its product offerings. With banking-as-a-platform already a successful model utilised by Alibaba and Amazon, the case for financial institutions to add platform banking to their offerings and grow brand value has become yet more pressing over the last year.

We caught up with Trevor Belstead, chief information officer of wholesale banking and post trade at Delta Capita, to learn more about the trends shaping the banking industry and what they’ll mean for market participants.

How will embedded finance reshape the banking industry?

Embedded finance will predominantly change how consumers interact with financial services, ultimately becoming more streamlined and simple. The impact of this to the banking industry will be more competition in smaller segments by organisations embedding backing services into their infrastructure. The other impact is that banks will become headless, offering their core products through other organisations that wish to embed financial services without the investment of their infrastructure. Embedded finance also opens up the whole ecosystem and the emergence of mutualised banking services, helping banks compete and reduce costs. The evolution of PSD2 has opened up these scenarios.

What functionalities do banks need with their digital offerings to stay relevant and competitive?

For banks to stay relevant they need to address digital in a holistic approach, i.e. a loan application captured digitally from the client then falls to manual operations. Competitors, especially FinTechs, have this approach when they start so they already have an improved experience for customers and reduced cost of operation. For a bank to try to achieve the experience of the competition is risky and expensive and often banks cannot deliver at the right pace. To address this, banks need to look to mutualised services and platforms that deliver commoditised functions in areas all banks have to perform, but provide no competitive value over another bank, this will provide cost savings and an accelerator to help them stay relevant. This allows a bank to focus on core value that differentiates them from the competition.

What is platform banking and how will it impact the industry?

Platform Banking is an emerging trend that is seeing increasing focus and demand from various banking segments namely retail and SME banking. Platform banking will start to drive a new ecosystem of collaborating organisations offering a range of services. Alibaba is a good example of the start of platform banking offering an extensive ecommerce platform coupled with insurance, trade finance and logistics provided by a range of different organisations. Taking the Alibaba example further you can see companies like Amazon offering financial services on top of what they currently do, providing consumers a one stop platform for finding and buying a house, organising a mortgage, insurance, furniture and utilities. One segment where I believe platform banking will have a significant impact is the SME banking segment, they are the most underserved segment and have the most fragmented experience running their businesses.

Is platform banking a complement or substitute to existing businesses?

Platform banking is a complement to existing banking, however by nature it creates a whole new business model for banks, which they will have to adopt to remain relevant as demand for such platforms increases from consumers. Platform banking can be seen as an opportunity for the bank or as competition, banks that see this as an opportunity will really put the customer experience first, and in doing so will naturally improve their brand value. Banks that see this as competition and wish to protect their brand by ensuring consumers user their digital experience will in my view damage their brand and ultimately lose customers.

What advantages are there to banks adding platform banking to their offering?

There are several advantages, the banks will support customer experiences in the way consumers operate rather than trying to control the experience, this improves the customers view of their bank and will ensure loyalty. Access to new clients, consumers are looking for relevant and simple experiences, so organisations who achieve this through ecosystem and platform models will attract new clients as they will be relevant at the right point in the user experience (as per the example in buying a house above).

What risk and compliance considerations does platform banking entail?

This will become a significant subject in platform banking as there are new risks that have to be addressed, such as a platform failure and the impact to a bank’s brand, fraud and financial crime where accountability and liability sit. Then there are the global regulations that the platform will have to address if it wants to be global or cross region. This will be an area that will only be fully understood when we understand the whole model of a specific platform. PSD2 and Open Banking APIs have provided an initial catalyst for this model already, however platform banking goes much further than PSD2.

How will the role of client service professionals in a platform banking context change?

In essence, the day to day role of a client services profession will not change, however it will increase the complexity of servicing a client as you have the platform element that a bank may or may not own, then there is the bank’s product servicing. It is already challenging for consumers to get the right support from a bank efficiently, as banks still operate siloed operations i.e. Mortgage, current accounts, and credit cards are often serviced by separate parts of the bank. Extending this to involve other organisations will be challenging and will require client services professionals to understand more of the ecosystems a bank operates in, resulting in more challenges to resolve issues for customers.

Fraud has increased massively during the pandemic, what has this meant for banks’ fraud models?

Bank fraud models are ever changing to keep up with the rate of fraud in the industry. The challenge during the pandemic was the ability for a bank to adapt their fraud detection to remain ahead of the fraud, due to significantly increased number and variation of fraud schemes. This will always be the case and individual banks will always struggle to keep up with fraud, this is due to the fact that fraud is executed at an industry level as well as targeted bank fraud. To resolve this, banks and the regulators need to start looking at an industry wide fraud detection model where all banks collaborate and get benefits from industry level data to implement new models or prevent identified fraud.

Is the banking infrastructure, both on a global and domestic level, becoming simplified or more complex?

I feel as an industry we have not yet achieved simplification to the level that is recognised for consumers. Simple things like loans are a minefield for consumers to understand the various products and then apply. In respect to global banking there has been significant work by many banks to simplify the global banking experience by providing a complete 360 profile of the clients accounts, helping corporate finance and treasury better manage their portfolio. There are many areas that banks can look to increase simplification specifically across retail and SME segments, corporate banks will always have significantly more complexity.

What emerging technology do you think we’ll be seeing more of in banking?

This is an ever-changing space, however I see in the next couple of years still focusing on the current trends being cloud and cloud native applications. DTL will also continue to progress and deliver more solutions and banks will adopt more of them, now that the hype from DLT has settled down. Another area I see significant change in, is the adoption of mutualised non-competitive services, it is not so much related to the technology trends, but the technology is very relevant as any managed service providing people and technology will need to ensure their technology is modern, scalable and secure (moving a banks legacy to another legacy is a non-starter).

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