FinastraUniverse 2021 Conference Takeaway: Decentralized Systems and more Fintech Partnerships
By W.B. King
Among takeaways from FinastraUniverse’s “Accelerating through Change” virtual conference was that the pandemic forced financial institutions from centralized to decentralized systems. And, there was, and is, a greater need to embrace fintech partnerships. The banks and credit unions that were most prepared for this shift had already seen the “digital” writing on the wall.
“When you look at the financial services industry today, I would argue a lot has changed, and will continue to change, well beyond this pandemic,” said Seattle Bank’s President and CEO, John Blizzard, who was a panelist on the Americas “Technology as a Catalyst for Open Innovation” segment.
“Given the unprecedented circumstances we were all facing, at the highest level, I think the banks did a pretty good job of transitioning from largely what was a centralized, on-premise operation, to a more decentralized operation, while providing a consistent, good level of service to customers,” he said. “There were a few market realities at the time that help make this transition, and that is the globalized foot print of the internet, the high-speed variety, and the growing acceptance of the cloud as the main delivery platform for [banking] products and services.”
The global event was moderated by Finastra’s President and Global Head of Customers Operation, Eric Duffaut. Finastra provides legacy financial technology and legacy enterprise software globally to banks, community banks, credit unions and financial services providers.
Blizzard was joined on the panel by Societe General’s Chief Information Officer, Claire Calmejane, and Aite Group’s Co-Founder and Managing Partner, Sang Lee.
“The pandemic changed a lot but it didn’t change the heart of the strategy. We had made a longtime investment in digital and human services,” said Calmejane. “We have seen a double-down on two things: The mission and how we can move forward. Innovation has been at the heart of everything we have done in the pandemic.”
Whether it is referred to as “banking as a service” or “open banking,” Sang said that banks and credit unions need to have an open mind.
“To remain combative in this fast changing, digital economy, the banks have to embrace openness and integration and collaboration. Not all banks are on this journey at this point, but this migration is certainly happening and accelerating,” he continued. “I don’t think the banks have a choice but to go down this path because by leveraging a really solid platform strategy banks can quickly enhance customer experience, which is something they have been struggling with for decades.”
Turning a Crisis into an Opportunity
Even before the pandemic, Duffaut noted that due to a mass consolidation of the market, many small-to-mid-sized financial institutions were faced with significant competing forces by larger banks. As a result, these institutions were required to be agile and flexible - both internally and externally. In some cases, certain organizations were ahead of the curve.
In November 2019, for example, Seattle Bank joined 11 other financial institutions from across the country and partnered with Google and its Plex Accounts. Under this platform, customers manage respective finances all from the Google Pay app.
“We have a number of ideas that we have been working on for years, some of which were on the shelf waiting to be deployed. We think there are huge, new opportunities to do cool stuff for customers,” said Blizzard. “They don’t all have to be huge like Google Plex. There’s lots of innovative ways you can help your customers.”
With the Google Plex Account program rolling out to Seattle Bank customers in 2021, Blizzard said it’s a misnomer that to remain competitive financial institutions have to merge to reduce tech costs.
“What gets lost in that [premise] is that they are working off an old business model and spending enormous amounts of money behind the scenes on this old technology, and that is a business problem,” said Blizzard. “We partnered with Google to deliver the next generation banking because we think we can spend a lot less money, be a little more creative and get a lot more bang for the buck. Their ability to create a user experience like no other is pretty phenomenal.”
By leveraging a sound, platform strategy, Sang said financial institutions that partner with fintech third party providers can more quickly enhance the customer’s banking experience.
“They [banks] can bypass their legacy infrastructure to pursue innovation. They are no longer hampered by what they built over decades,” said Sang, adding that these fintech partnerships also allow speed to market.
“Through shared services, pre-integration with apps and APIs—they can do all of this under a fairly reasonable cost structure and perpetually reduce overall total cost of ownership,” said Sang. “This is a win-win for everyone. When these are all added up, it enables banks to focus on their core capabilities and accelerate and sustain innovation, which I think is the end goal.”
For smaller to mid-sized institutions that may be struggling with a limited IT budget, Sang said not to worry as these fintech partnerships are geared toward all asset classes.
“This isn’t just available to large, global banks,” he said. “This is literally available to everyone. One could easily argue that the platform strategy itself might actually be better suited for regional or smaller banks because they can leverage a very well-established third party platform. This is a way to level the playing field.”