Interview: Mambu helps banks and disruptors to level the financial playing field

By Nicole Miskelly | 28 November 2014

In a time when new entrants are disrupting the financial sector, many industry experts believe that banks should start to disrupt themselves or they will be overtaken. Cloud banking platform provider, Mambu is levelling the financial playing field by enabling disruptors to enter the market and giving banks access to the technology needed to keep up with these new entrants. bobsguide speaks to Eugene Danilkis, co-founder & CEO, Mambu about cloud security and trends in the financial sector.

Tell me more about Mambu

Mambu was established in 2011 to service and meet the needs of the banking sector. We have lending customers from all over the country providing loan and deposit products and we provide them with the back and middle office core technology which enables them to design and service their products and integrate them into different delivery and service channels.

We help small financial institutions such as micro-finance organisations, non-bank institutions, credit unions and other lending focused organisations to transform their business to keep up with the changing digital landscape. Since 2011, there has been a change in customer expectations and a move towards digital and mobile. Traditionally, only larger institutions have been able to access the resources and technology needed to keep up with these changes, which is why we wanted to enable smaller financial institutions to access the same technology so that they can better service their existing customer-base and also empower them to build upon their boutique services.  

We also help to launch new entrants – banking disruptors – into the market. There are currently a large number of disruptors entering the financial space who are challenging banks by offering better, faster and cheaper services. The disruptors that we work with are innovating around customer channels, product portfolio speed of underwriting and overall digital customer experience. Many lending organisations are obtaining data from different sources to automate credit decisions or to augment their human processes to find more information and to use for pre-screening credit decisions.

What opportunities do existing banks have to disrupt their own bank technology?

Banks are currently exploring different options; they are either trying to replace their legacy technology which are expensive, big projects that often take many years and tens of millions of dollars to complete, looking at different segments of the business which could be transformed or deciding to launch a total new segment.

We can see the difficulty in organisations trying to willingly disrupt themselves and believe that banks could successfully do this by either launching a separate entity which addresses a similar niche part of the market that grows at its own scale and eventually disrupts the bank, or by expanding into new markets where the bank isn’t active and tackling this in a new way compared to how they would have done previously.

What are the best practices for data security in the cloud?

The way that many top-tier organisations set up their processes and data security is very costly. There is uncertainty around cloud because there isn’t always an understanding about what is going on. All high-quality cloud providers invest a considerable amount of money in talent and create teams to test their security at a level which most financial institutions could never afford to do. Cloud technology enables small to mid-sized institutions to access the best-of-breed security technology and talent whose entire business is to make sure everything is secure and reliable.

What are banks most concerned about when comes to cloud security?

Many banks are concerned with regulatory compliance because there has been a lot of ambiguity in some of the regulations as to what constitutes data access. Regulators need to take a closer look at what cloud providers really do and how it benefits their institutions and reduces the risks for the clients. Cloud providers themselves need to be more active about helping to educate the regulators about the benefits and put in place viable business continuity plans in collaboration with their bank partners.

How can banks overcome their concerns around secure banking transactions?

I think that banks need to look internally to establish what they provide in terms of security, how often they test their own security and how secure are their data centres etc. Then they should try to understand what the cloud provider is doing on their side, are they providing the same level of security testing or are they doing more and if so does the bank want to keep up with this? It is important to move away from what cloud does and to understand that it is a pooling of resources made up of servers, databases and technical talent. Very few institutions would be able to bring the level of resources and skill required for this in-house and be able to offer similar levels of service quality to as bank.

How can banks stay more relevant to their customers?

If their business is being disrupted, banks need to decide how they want to react to that disruption. I think that they can respond in the following ways:

1. To provide capital to the disruptors and fund them to help them grow faster. This is a lower-risk and lower-effort endeavour but will be highly competitive low-margin business and further disconnects them from their end clients.

2. They can start to transform their business by looking at various business units which to transform and how to do quickly and cost-effectively. Multi-year, multi-million dollar single-platform transformation projects may not be the best answer for everyone.

3. Act as a disruptor and launch a separate, alternative business that focuses on new market segments or those that their core business is now losing out to competitors.

What are your views on the rapid growth of innovation from emerging markets?

There are more growth opportunities in emerging markets because of the larger amount of underserved individuals and the vast amount of underserved businesses. Cloud in emerging markets for example, makes technology that was once only accessible to the top-tier businesses more accessible to more organisations. There is a lot more potential in these areas and I think that we will see a lot more new entrants and more businesses transforming much quicker in these markets than we will see in other areas.

By Nicole Miskelly, bobsguide Lead Journalist

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