Put NOT a customer at the centre. A new approach to the customer-centric strategy. 

Why you shouldn’t ask your customers what they want?!

 

 

It has been assumed that most companies, when crafting product portfolios, seek to understand customers’ needs first and then fine-tune product’ parameters so they’re best suited to answer these needs.
At INCAT, we believe that to be successful in today’s finance world, you need to take this approach two steps further…

Going two steps further…

1) Step one is focusing on customers’ stories rather than just their needs.
2) Step two is to jump into the story at the very moment it starts unfolding.

But what exactly do we mean by customers’ stories and how focusing on them can help you achieve business success?

Let’s start with an example.

Imagine a well-off individual who’s in the market for an expensive piece of electronics – say, a pricey TV.  He or she may have a sufficient amount on a current account or credit card, but deducting the full price straight away would mean that the account would be swept clean for the rest of the month.

This, of course, calls for some sort of short-term financing: a loan, buy-now-pay-later or a similar product. If you have a solid grasp of customers’ needs and preferences, you’ll be able to tell which product would be best suited to their needs, and which of its optimal parameters and benefits to highlight.

Let’s take another case: a foreign vacation. All the excitement of holiday making – traveling, sightseeing, visiting tourist attractions, dining out, partying – inevitably tend to be followed (or sometimes preceded, e.g. booking a hotel) by a rather mundane string of transactions. These often include currency exchange, which can lead to a sobering realization of how costly it can be to just use your ordinary Visa or Mastercard.

Again, when you know your customers’ preferences, you should be able to present a product your customer perceives as optimal: quick currency exchange, a multi-currency payment card or a currency account.

There are two challenges, though.

First, although such a needs-based approach – or a customer-centric approach – tends to be more and more effective as your understanding of customers’ needs grows, it still has its limits. It doesn’t facilitate innovation, as it tends to keep you within the realm of products that customers already know.

This is a major drawback in a world that is being reshaped, and sometimes even revolutionized, by new products emerging on virtually a daily basis. Just think about how all the online currency exchange services have been made basically redundant with the emergence of Revolut.

Therefore, we believe that the customer-centric approach needs to be reimagined as a customer story-centric approach.

 

Introducing BOS’ customer story-centric approach

It’s tempting to think that customers need specific financial products in certain situations. It seems to be a very convincing point of view, since even customers themselves tend to adopt a product-oriented perspective. Buying a house? I need a mortgage. Buying a car? I need leasing and insurance – or maybe a deposit and insurance, if I choose to save up and finance the purchase myself. Going abroad on a regular basis? I need a multi-currency card. Getting a new TV? I need an installment loan.

But the truth is, customers don’t really need these financial products – they just use them to realize their true needs.

These stories can be simple or quite elaborate. Buying a TV is the former: it’s just making the purchase and paying for it in a way that doesn’t distress the monthly budget. Going abroad for a vacation? While a vacation might be an amazing adventure and make a great story that takes hours to tell, its financial aspect boils down to spending money and exchanging currency in the process, preferably quickly, hassle-free, and inexpensively.

Did you notice how we’re not talking about specific products here? This is deliberate. A product-free perspective lets you see more clearly what the core of the story is.

On the other hand, buying a car or house is usually a complex endeavor, with its stages interdependent on each other and more than one potential path from start to finish. In such cases, it can be virtually impossible to avoid bringing up specific products, because they are sometimes rigidly tied to a given process. Nevertheless, you should still be trying to sketch out the core story.

Once you’ve got it done, you can begin picking specific products – your own and third parties’ – to match it. The less they affect the underlying customer story and the more seamlessly they fit into it, the better.

Remember, your customers don’t really want to use your products. They only need them to have a great time on holidays, get a huge screen for their home cinema or drive a new, safe, eco-friendly car. The less time is needed to spend with your products, the less effort these products require and cost, and the more transparent they are – the better.

And the more likely it gets they’ll… grow to love using your products.

Your customers don’t really want to use your products. They only need them to have a great time on holidays, get a huge screen for their home cinema or drive a new, safe, eco-friendly car.

 

Real-time marketing turns into real-time banking

Of course, you might say that this is an approach that the financial sector is already starting to embrace. Even some of the biggest banks are aiming to make their products as “light” as possible, i.e. effortless to use and readily available via mobile apps with just a few taps.

They’re also getting better and better at targeting their customers and presenting them with products they likely need. If banks notice their customers are making frequent card transactions abroad, they offer them a multi-currency card or a currency account. Once the total amount on the monthly credit card statement reaches a certain level, they suggest paying it back in installments.

And this brings us to the second challenge we mentioned earlier.

By its very nature, customer profiling takes time. Also, it’s usually processed in separate systems, such as CRMs or dedicated analytical software. As a result, banks are usually weeks or at least days behind their customers.

This, however, is not the case with BOS. With BOS, you can jump into the customer’s story at the exact moment it is starting to unfold.

This is possible thanks to BOS’ event-driven architecture, which means that:

  • every action taken by the customer is an event
  • events are processed in real-time
  • every event may trigger a system action, such as generating a transaction or sending a message to the customer (or other recipient).

With BOS, you can jump into the customer’s story at the exact moment it is starting to unfold.

In other words, every card transaction, every bank transfer (initiated or received by the customer), and every loan application submitted is an event – and so on. Also, every system-originated activity, such as charging a fee or generating a monthly statement, is an event.

And that’s not all, as events reach beyond financials: every time a mobile app is open also constitutes an event. So does logging in to your online banking system.

-> Your customer has just paid over $2000 in a consumer electronic store with your card? Ask them straight away if they want to split it into installments, or automatically “re-route” the amount to your buy-now-pay-later product.

-> It’s your customer’s third day abroad and their currency account is running low? Send a display notification suggesting currency exchange – or even process one automatically if the customer has chosen such an option earlier.

A specialized BOS module – the Event Orchestrator – lets your system administrators set up triggers and relations between events and create scenarios – such as the ones mentioned above or more – complex ones. Their number and level of sophistication depends solely on you. You can rely on the event definition supplied with the system, or create your own. Event Orchestrator is intuitive to use and ergonomically designed, so setting up scenarios is fast and requires only basic training.

The only limitation is the innovative spirit of your company, as well as its ability to spot emerging opportunities and its understanding of customer needs.

Or should we say: stories.

***

Have thought about this subject? Contact the author: zdzislaw.grochowicz@incat.com.pl

***

ABOUT THE AUTHOR: 

Zdzisław Grochowicz is the Head of Business Development at INCAT. Zdzisław has been involved in the banking and financial sector for almost 30 years. Previously, he worked for Comparex Ltd. For many years he was also associated with the Sygnity Group – where he played numerous roles.
Zdzisław Grochowicz graduated in Electrical Engineering at the Szczecin University of Technology.

Email: zdzislaw.grochowicz@incat.com.pl

 

 

 


Core banking software list for 2022

9 top core banking solutions you should know

The banking industry is a sector of the economy, that, in recent years, has experienced very dynamic digitization processes, which were additionally strengthened and accelerated by the COVID19 pandemic. However, this is not surprising. A recent report released by Ernst & Young showed that almost 50% of banks did not modernize outdated IT systems as quickly as they should have, and almost 43% of American banks still used COBOL – a programming language developed in 1959! Fortunately, providers of more and more modern core banking solutions, created in almost all corners of the world, come to the rescue. 

The definition of core banking

A back-end system that processes banking transactions throughout a bank’s multiple branches is known as core banking. Deposit, loan, and payment processing are all parts of such a system. In addition floating new accounts, servicing loans, calculating interest, processing deposits and transactions, and customer relationship management activities are all essential fundamental banking services in this type of system.

Core banking systems are designed to give existing and potential customers more control over their account activity. Thanks to technological advancements, transactions have become safer, faster, and less demanding. Core banking systems have been a critical feature of banking in recent years because these transactions can be completed remotely from anywhere on the planet.

Core banking solutions may reduce operational costs significantly, resulting in fewer work requirements for execution. They also allow customers to be more accountable. In addition, core banking systems are more user- friendly and efficient thanks to software application-based platforms. The advantages of core banking systems are numerous, including keeping up with a rapidly changing market, streamlining banking operations and making them more straightforward for customers, and expanding a bank’s reach to remote locations.

 

 

Born in the cloud

According to Gartner- by the end of 2023, public and private cloud will each account for 5% of commercial off-the-shelf (COTS) core banking installations for an overall 10% of the COTS market. New core banking software platforms are built on cloud and digital technologies and use open API-based architecture to better interface with various internal and external services and systems.

Lower costs, faster time-to-market and more superficial connections with multiple services that may improve customer experiences are all advantages of new core banking systems. However, developing core banking software in-house is a complicated and time-consuming process that can overwhelm teams and delay product launches. Many well-known fintech brands have outsourced their core banking software from fintech providers.

Below, we present nine of the most interesting IT solutions on the market that are worth considering when choosing a modern and technologically advanced transaction system for your financial business.

Core banking software list for 2022

1. Mambu – SaaS cloud banking platform

Launched in 2011, Mambu is a software-as-a-service, cloud-native, API-driven banking engine provider that powers lending and deposit services. The company enables financial institutions of all sizes to design, launch, service, and scale their banking and lending portfolio. It empowers over 7,000 loan and deposit products which serve over eight million end customers, with more than three million active accounts in over 46 countries, ranging from fintech to traditional banks. Mambu’s historical customer base includes microfinance institutions and fintechs. However, Mambu currently focuses on larger banks launching spinoffs or migrating. Its installation base is spread mainly across Western Europe, Latin America, and sub-Saharan Africa. The country with the most installations is the U.K.

2. Thought Machine – foundation of modern banking

Thought Machine is a fintech company that builds cloud-native technology to revolutionize core banking. Its mission is to solve one of the banking industry's primary problems: its reliance on outdated IT infrastructure. Nearly all banks are stuck on a legacy IT platform, which cripples their ability to innovate and give their customers the type of service they deserve.

The company provides a solution to this: Vault - a complete retail banking platform that's capable of being configured easily to suit the needs of any bank. They've built Vault from the ground up as a cloud-native, microservice API architecture platform. Thought Machine has a deep culture of engineering excellence, and they believe it's this that delivers a solution compelling enough to engender a seismic shift in the banking industry.

 

3. BOS by INCAT– bringing the digital revolution to banking

Founded in 2018 BOS is a fully flexible, cloud-native, and composable transaction system dedicated to fintech start-ups and neo/challenger banks. BOS has been created by INCAT – a fast-growing tech company that wants to empower companies to bring the digital revolution to finance and banking.

The BOS system is perceived as one of the most flexible banking software on the market, and is a first-choice solution for companies looking for quick implementation, reasonable costs, and easy integration with external systems. BOS is cloud-native, API-driven, and based on microservices software solution. It has been built from scratch to operate securely and efficiently in the cloud, but it can also be installed in any computing center (private cloud, on-premises).

BOS system is perceived as one of the most flexible banking software on the market

BOS' functionality is designed according to the Business Lines- concept (BOS Core, Payments, Savings, Lending, General Ledger) and is tailored to the customer's business ideas and goals. The system is available as a licensed solution with implementation and maintenance support, as well as a subscription model based on license rental with maintenance support, preceded by implementation of the system (low entry cost threshold). BOS is also a sharia-compliant core banking software. It allows its customers to run any financial products in compliance with Islamic law. The software is used by next-gen international fintech brands all around the world (Belgium, Saudi Arabia, Lithuania, Poland, Hungary etc.).

 

4. Temenos - a digital core-banking solution you can bank on

Temenos Group AG is a market-leading provider of banking software systems to retail, corporate, universal, private, Islamic, microfinance and community banks.

Headquartered in Geneva with 68 offices worldwide, Temenos serves over 1,000 financial institutions in more than 125 countries across the world. It was founded in 1993 in Geneva, Switzerland. From the outset, it had a simple mission: to rid the banking industry of its legacy software.

Ever since then, Temenos has worked to make this mission a reality. It has invested more than USD1bn in developing great banking solutions. It has grown its product set from core banking to payments, wealth management, business analytics and channels, offering a comprehensive set of solutions to meet the industry’s needs.

 

5. FIS - the foundation stone of a modern banking platform

FIS is an American multinational Fortune 500 corporation that offers a wide range of financial products and services.

FIS is best known for its development of Financial Technology - FinTech - and as of Q2 2020, it offers its solutions in three primary segments: Merchant Solutions, Banking Solutions, and Capital Market Solutions. FIS focuses on retail and institutional banking, payments, asset and wealth management, risk and compliance, and outsourcing solutions. It serves more than 20,000 clients in over 130 countries.

 

6. Oracle Flexcube - Core Banking Made for Tomorrow

FLEXCUBE is an automated universal core banking software developed and introduced by Oracle Financial Services. This solution is designed for financial organizations and banks. It offers customer-centric core banking functionalities. It ensures a holistic view of all customers and enhanced communication between bank employees and consumers.

Due to FLEXCUBE’s opensource environment and multiple API management, its users can create their business logic and interfaces, as well as integrate the system with third-party applications. This international core banking system is compliant with various regulations and suitable for any bank in over 115 countries.

 

7. Finastra – the future of banking

Formed in 2017 by the merger of Misys and D+H, Finastra provides a broad portfolio of financial services, spanning across retail banking, transaction banking, lending, and treasury and capital markets. The solution enables customers to deploy mission-critical technology on-premises or in the cloud. Finastra is an open and reliable solution that allows customers to accelerate growth, optimize costs and mitigate risk. Forty-eight of the world’s top fifty banks use Finastra technology.

 

8. nCino - by bankers for bankers

Launched in 2012, nCino offers a cloud-based bank operating system created by bankers for bankers. The system helps increase profitability, productivity gains, regulatory compliance, and operational transparency at all organizational levels as well as across all lines of business.

Following a process structure similar to a bank’s loan accounting system, this bank operating system offers combined services through its business process management, loan lifecycle, business intelligence, and document management solutions.

 

9. Backbase - re-design your bank around the customer

Backbase was founded in 2003 and provides all the building blocks banks need to fast- track the implementation of their next-generation digital banking vision. The platform enables banks to create and manage seamless customer experiences across any device that's directly integrated with any back-end system. Superior digital experiences are essential to staying relevant to consumers, and Backbase enables financial companies to rapidly grow their digital business.

More than 150 banks and credit unions around the world have standardized the Backbase platform to streamline their omnichannel/digital operations, including ABN AMRO, Barclays, CheBanca!, Credit Suisse, Deutsche Bank, Fidelity, Hapoalim, HDFC, KeyBank, NBAD, OTP, PZU, PostFinance, Societe Generale, and Westpac.

 

As we can see in the above list, there are more and more solutions that can respond to increasingly demanding fintech companies.

However, it's worth looking for a solution that in addition to its technologically advanced architecture, is able to flexibly adapt to all of our needs and enable a quick launch of any financial product.


Want to build a fintech unicorn?

Although it is still believed that the success of a fintech startup revolves primarily around an innovative product and great marketing, in the context of this demanding business, this is just the tip of the iceberg. In addition to the challenges related to financing the business or taking care of formalities, such as licenses and approvals for financial activities, other aspects also need to be taken care of. The most important activities include selecting and implementing the appropriate technology on the basis of which you can freely build your product. In the following text I will try to explain why, in my opinion, the modern technology dedicated to fintechs supports not only the technical aspects of the product but also gives financial entities a significant business advantage.


A solid foundation is the key to success

Each institution that begins financial activities must base them on a transaction system that, in the simplest terms, processes and organizes data about customers, their accounts and transactions. The system is the basis, and it's built around additional functionalities such as front-end mobile and browser applications, AML and anti-fraud systems, KYC (Know Your Customer) modules and currency transfers. To date, the role of transaction systems has been limited primarily to the functions listed above. They were aimed at enabling efficient financial activity in a manner that is consistent with the assumptions of compliance. However, transaction systems are currently playing an increasing role in shaping the products and services of fintechs as well as support in the field of marketing and product development. Today, the transaction system is important not only from a technology perspective but also from a business one. How is this possible?

Good product is smart marketing

Nowadays, a great advantage of fintech is not only an innovative product, but also the ability to implement new business functions as quickly as possible and to respond to new customer needs. To achieve this, it is worth first focusing on a transaction system that enables the efficient creation of a modern offer, and maintains existing products, aimed at consolidating the business advantage.

 

By creating the BOS transaction system at INCAT, we noticed that our clients need solutions that, irrespective of their original application, address the requirements of a modern end customer in the customer-centric model.

 

Therefore, currently modern financial entities require core systems with the functionalities not only focusing on the technological and product layer but also supporting an innovative approach to processes that  addressing customer needs. Today, customers are not looking for a savings account with specific parameters, but a set of functions that will at a reasonable price efficiently achieve their goals in compliance with quality and safety standard.

Core banking engine supports your business

In the light of the above, we need to ask the question "which areas do a modern transaction system work in"? and "what functionalities can play the role of autonomous processes directed at specific target groups"? The advanced technology behind modern banking solutions actually has no functional limitations. Whether we create solutions only to solve a problem, or also to provide new opportunities, depends only on the boundaries we impose on ourselves. The mindset at INCAT, supported by the creativity of our clients, has always been focused on full business usability. Hence, ideas on how to develop this area in our solutions come to us quite easily. I am often asked about examples of the functionalities of the transaction system, which are also characterized by considerable marketing value. In response, I quote specific products, that are ready to be used in financial activities. These include partner programs, automated cascade currency conversions, or support for white labeling (multi-brand).

Partner Program

The transaction system can be used when creating a product such as a partner program. Thanks to this functionality, entities offering their customers a system of collecting points, obtaining discounts or quick returns can build the long-term loyalty of their recipients. An example of a great implementation of this tool is the ZEN card offered by the dynamically developing fintech ZEN.COM, which provides a number of benefits for its users, such as extended warranty and a quick cashback module.

Currency cascade

This is another example of a very interesting solution that makes it easier for customers to make payments under non-standard conditions. It allows for the automatic use of the customer's funds accumulated in various currencies during the execution of a single transaction if there is a lack of funds on the main account or an account kept in the currency of the transaction. In other words, if a customer makes a payment of EUR 40, with only EUR 30 available on the account, the payment system automatically takes the missing amount from the remaining foreign currency accounts, e.g. in USD or PLN by making an immediate currency conversion. The whole process takes no longer than a standard contactless payment and doesn't require any activity on the customer's side. Currency cascade is another example of a solution that's available to users of a payment card offered by the ZEN.COM fintech.

Multi-brand

Multi-brand is a functionality that enables the separation of independent environments of several brands and institutions, administered by one entity.

 

This is a great solution for institutions that decide to offer products directed at various target groups and different market segments.

 

An example of using this product is the offers of large loan companies. In order to expand their customers' portfolios, they create several loan brands that differ in their parameters and terms of obtaining financing. At the same time, they are formally part of one large capital group and don't have any business relations. The system also supports the possibility of running many independent brands/institutions thanks to the tight separation of parameters and data as well as proven performance. The advantages of multi-brand are already noticed by some Polish fintechs that use this functionality, for example, to integrate their own financial products with the offers of their partners.

The above-mentioned examples are only a small sample of what can be achieved in the field of financial product development, with a modern transaction system at your disposal, the open architecture and adopted solutions of which allow for their quick implementation. Today, in the era of modern banking, it is not enough to do something well enough - you have to stay ahead of trends and create solutions that respond to needs that are yet to emerge. It's worth spreading this awareness so that the promising fintech industry, develops even faster, creating a completely new quality in the financial market.

 

ABOUT THE AUTHOR: 

Michał Mazur is the Senior Business Development Manager at INCAT Sp. z o.o.
In his over 20-year career, he has been involved in financial and IT sector projects. He has extensive experience in project management, analysis, business development, system architecture, and quality assurance.
Michał Mazur is a graduate of AGH University of Science and Technology.

Contact an author: michal.mazur@incat.com.pl


Flexibility is King

A recent survey conducted by Accenture leaves little doubt: the future of finance lies in the cloud. Even seemingly sedate institutions such as banks are determined to migrate most of their core functions away from their mainframes. 82% will operate more than half of their workload in the public cloud in the next ten years (in fact, almost a third already does). This represents a massive shift in IT strategies over the course of just a few years. The main reason? The agility and speed of cloud-based core systems. 
In INCAT we believe that agility and speed are only some – although important – properties that cloud-based core banking systems should boast. When we were designing BOS – our flagship core banking engine, we decided to offer to the market much more than just agility and speed. We decided that ‘full flexibility’ would be something that will make our system stands out. And flexibility itself became a part of the DNA of our product.
After many years of developing our system, we have identified 4 key areas that have to be covered if the core banking system is to be considered fully flexible:
  • technology: IT solutions that allow for scalability in both quantitative and qualitative aspects,
  • functionality: ability to easily shape and modify the customer stories to perfectly fit customer’s needs and the company’s marketing strategy,
  • implementation: an agile approach to launch and system development,
  • business: pricing adapted to the scale of operations.

THE FOUNDATION: FLEXIBLE FUNCTIONALITY

Choosing the core IT system is vital to the success of a fintech startup or a challenger bank. Not only must this crucial system allow for crafting products aligned with current marketing strategy and consumer preferences, but it also has to enable adaptation as they change in the future. Also, the ever-evolving technological landscape and regulatory environment require constant, sometimes swift adjustments and product modifications.
Many fintech brands start with a very limited product portfolio, oftentimes limited to a single product with a breakthrough in its service. While such a focus on perfecting a product is beneficial at the early stages, it may become a barrier to growth when customer numbers increase. Take Revolut – a company that started off as a money transfer and currency exchange is now a full-fledged neobank with 18 million customers, boasting dozens of products, including personal and corporate current accounts, deposits, loans and Mastercard and Visa payment cards.
While hardly any new player to the market will have a precise, predetermined path of product growth, most will need a possibility to evolve inscribed into its core system. This should be possible via both proprietary modules, supporting all the core banking products (accounts, payments, deposits, loans etc.) and fully documented APIs, allowing for integration with third party solutions.
BOS does it all. Thanks to its Customer Stories concept, fintechs that run it as a core system can offer their customers banking products ranging from payments, savings through loans based on a foundation of the general ledger. Whether they need the full variety or just the selected product, BOS will suit their needs.

TECHNOLOGY MUST BE UP TO THE TASK

All of these require adequate technological solutions – APIs being only one of them. Deploying the core banking system in the cloud is probably the most vital when it comes to scalability. Unlike mainframe systems, cloud-based ones easily and effortlessly adapt to fluctuating workload, be it a sudden growth or a significant decrease. Hardware ceases to set limits for operations: cloud-based core banking systems can serve 10 million customers as easily as it just served 10 thousand. Even though it’s hardware, it still can – and should – be flexible.
Another key feature technology-wise that fintechs and challenger banks should be on the lookout for when choosing a back-end system is a microservices architecture. Not only does it further increase scalability, but it also allows for smooth and simple functionality development. Microservices-based systems also tend to be more resilient and potential issues are easily isolated and fixed.
Also, there are things that should go without saying – but surprisingly often don’t. In today’s world, when customers access their financial services 24/7, fintechs should be able to provide them with virtually 100% availability. Gone should be the weekend upgrade breaks or downtimes of any other nature.

Hardware ceases to set limits for operations: cloud-based core banking systems can serve 10 million customers as easily as it just served 10 thousand. Even though it’s hardware, it still can – and should – be flexible.

 

KEY TO IMPLEMENTATION: AGILITY

The phrase “time is money” is probably even more true than it has ever been: months or even weeks can mean the difference between success and business failure. Thus the dominant MVP-oriented approach among startups, also including those in the financial sector. Product definitions are outlined in general terms and detailed only as the project is already ongoing. Agility is no longer avant-garde or nice-to-have: it’s a prerequisite for survival.  Thus, when choosing core banking solution providers, challenger banks and fintechs should be looking for companies that can fit into this regime. The ability to launch a product within weeks of project start can spell a market win.
This of course requires full support and partnership from IT solutions providers.  In INCAT we understand it perfectly and we make our implementation team fully available to our customers. And last – but definitely not least – is the business aspect.

BUSINESS MODEL ALIGNED TO STARTUP’S NEEDS ALIGNMENT

Deploying a core banking system can present significant business risk, as it often means high initial investment and significant monthly overheads. These in turn have to be counter-balanced by adequately high sales and margins, which may be challenging for a newcomer. According to Statista.com data, there were over 26 thousand fintech startups globally, as of November 2021. It’s a 26% percent rise when compared to 2020, and a whopping – 116% –  leap from 2019.
The twofold rise over the last two years represents both the sector’s attractiveness and lower costs of entry, but the sheer number of players shows how competitive the market has become. If a fintech is not able to start off light, its chances of success – or even survival – grow slim. The possibility to build a business over a core banking system with flexible price plans, with relatively low initial investment and price tiers based on scale of operations (e.g. the number of customers, accounts or transactions) can make the business case solid and as safe as it can be in today’s environment.

ABOUT THE AUTHOR: 

 

Zdzisław Grochowicz is the Head of Business Development in Incat. Zdzisław has been involved in the banking and financial sector for almost 30 years. Previously, he worked for Comparex Ltd. For many years he was also associated with the Sygnity Group – where he played numerous roles.  
Zdzisław Grochowicz graduated in Electrical Engineering at the Szczecin University of Technology.

Contact an author: zdzislaw.grochowicz@incat.com.pl


10 Words of Wisdom quotes about financial industry

Who doesn’t like a good quote? We come across interesting and useful quotes all of the time in literature, news media, entertainment, and so on. A potent, succinct quote that underlines a key point or supports an important truth can be like gold. Here are some great quotes from industry leaders that simplify big ideas, point to the future of banking online, and inspire us to implement more effective strategies.

1. Brett King

The CEO and co-founder of Moven, King is also a bestselling author and Breaking Banks radio show host. King was named “King of the Disruptors” by Banking Exchange magazine, with American Banker naming him Innovator of the Year in 2012.

Banking has to work when and where you need it. The best advice and service in financial services happens in real time and is based on customer behaviour, using principles of Big Data, mobility and gamification.

2. Arvind Sankaran

Arvind has global expertise in retail banking and wealth management, built over 25 years with focus on ASEAN markets. He currently advises fintech and edtech ventures. He also serves as a strategy for Crayon Data.

We’re witnessing the creative destruction of financial services, rearranging itself around the customer. Who does it in the most relevant, exciting way, using data and digital, wins!

3. Ron Shevlin

Shevlin is currently director of research at Cornerstone Advisors where his research focuses on retail banking products and services. He is the author of the bestseller, Smarter Bank and is the author of the award-winning blog Snarketing 2.0 which is published by The Financial Brand.

The challenge for banks isn't becoming “digital” - it’s providing value that is perceived to be in line with the cost - or better yet, providing value that customers are comfortable paying for.

4. Chris Skinner

Chris Skinner is a London-based independent commentator on the financial markets and the chairman of the Financial Services Club. He is the author of ten books including his most recent bestseller, Digital Bank. He is also chief executive of the research firm, Balatro Ltd, and a regular commentator on BBC News, Sky News, and Bloomberg about banking issues.

By partnering with fintech startups, banks will give their account holders the right measure of security and speed. Account holders can know that their money is safe, and they can enjoy the latest financial technology. This is the way to becoming a digital bank.

5. David Brear

David Brear has a deep range of experience in agency, consultancy and client side work for a number of top financial services brands.

Brear is now part of the international Think Different Group. Previously, Brear headed the UK Digital Banking practice for Gartner Consulting, helping key banking clients put in place the right foundations and innovations to grow, expand, defend and run their markets and operations.

Technological innovations will be the heart and blood of the banking industry for many years to come and if banks do not make the most of it, the new players of Fintech and large technology companies surely will.

6. Jim Marous

Jim Marous is currently the co-publisher of The Financial Brand and the publisher of the Digital Banking Report.

Financial institutions must be able to deliver an easy to navigate, a seamless digital platform that goes far beyond a miniaturized online banking offering

7. Giles Sutherland

Giles Sutherland is the Chief Commercial Officer at Carta, where he leads a team developing and executing business strategies to drive partnerships, commercialize products, and monetize technology platforms.

At the end of the day, customer-centric fin-tech solutions are going to win.


5 myths that fintech startups shouldn't believe

The fintech industry has been growing at an impressive pace for several years. New, unusual solutions are appearing and the biggest players are outdoing each other in offering innovations. Due to the increased interest in modern banking, the fintech industry is surrounded by long-held beliefs that have little to do with reality. At INCAT, while working every day with entities planning to enter the fintech industry, we encounter such misconceptions all the time, so today we decided to tackle the most popular ones that create a false image of the industry.

 

1. It takes a huge amount of money and time to make a fintech

What is the truth?

The amount of financial expenses that a fintech startup incurs depends primarily on the business model adopted. If you decide to develop the whole fintech infrastructure and a wide range of services, then of course it requires a lot of funding - you need a budget for operations, infrastructure, team, technology and marketing. However, if you choose the minimal option and decide to develop one service at the beginning and see if the market will accept it, then you can afford to optimize cost and time by choosing, for example, the INCAT FaaS AI platform, which allows you to quickly implement a transaction system and the possibility of subscription billing instead of a standard license.

2. Your product or service must be a gamechanger

What is the truth?

Innovation is a word that is used in all cases in the fintech industry. It is commonly believed that a solution offered by a fintech company must be unique and must completely change the rules of the financial market. Meanwhile, the recipe for success in the fintech industry is much simpler - you don't have to reinvent the wheel and create a solution that no one else offers yet. You can do similar things to those already on the market, just do them better. Find out what the pain points of users of existing solutions are and answer them, without necessarily changing the status quo right away.

3. Fintech's biggest enemy is the traditional bank

What is the truth?

The competition titled "fintech vs bank" has existed since the very beginning of the fintech industry. The thing is, while in the beginning there was a slight rivalry between banks and fintechs, this has now changed to collaboration. Banks recognize the technological potential of fintechs, while fintechs are open to partnerships with banks to build their customer base and navigate the challenging regulatory environment. The PKO Polish Banki initiative titled “Let’s fintech with PKO'' can be an example of such cooperation. Let's Fintech with PKO Bank Polski is a program of partnerships with startups under which PKO is looking for fintech solutions ready to conduct internal and production pilots and scale their business in partnership with the Bank.

4. Regulation kills innovation

What is the truth?

The fintech industry is an area that, just like banks, operates in a certain regulatory environment, but it is not designed to stifle innovation, but to create standards and to ensure transparency and security of financial services. In addition, Polish regulator - KNF creates a number of initiatives that support and educate fintechs on the requirements they must meet to become a full-fledged participant in the financial market. Such initiatives for example include the creation of the Innovation Hub educational program and the creation of a virtual sandbox for fintech start-ups.

5. Fintechs don't care about client’s security

What is the truth?

It is exactly the opposite. Fintechs, unlike traditional banks, are still working on trusting users and convincing them to deposit their assets with them. This makes it all the more important for them to take care of the security of their customers, because not taking care of this issue is a one-way ticket. Although we still hear about various security-related mistakes in Polish banks, banks have such a strong position among their customers that they often indulge in such slip-ups. It's different with fintechs - any mistake can have consequences in the form of ruining the image of a trusted financial partner, so fintechs are very sensitive to user security aspects.


5 financial industry trends in 2022

The end of the year is coming, so on the one hand is the time to sum up the past months, but on the other hand, it is a good moment to forecast what to pay attention to in the next, coming year. Although technology in the financial field is not changing so rapidly in comparison to others, there are still new solutions and trends to consider. What technology trends will emerge in the fintech industry in 2022? Let's find out:

1. Hyper Automation

Hyper automation is not just a technology trend, it touches business processes in a big way.

The increasing emphasis on growth, digitization and operational excellence
have highlighted the need for better, more widespread automation.
Hyper-automation is a business approach to identify, verify and automate as many business and IT processes as possible. It requires Orchestrated use of multiple tools and technology platforms, including RPA, low-code platforms and process mining tools.

It is an extension of existing business process automation beyond the boundaries of individual processes. By combining AI tools with RPA, hyper-automation enables automation of virtually any repetitive task performed by business users.

It even takes it to the next level and automates automation - dynamically discovering business processes and creating bots to automate them. Hyperautomation was identified by Gartner as one of the top 10 strategic technology trends of the year.

With an array of tools such as Robotic Process Automation (RPA), machine learning (ML) and artificial intelligence (AI) working together in harmony to automate complex business processes - including where domain experts were once needed - hyperautomation is the way to go for true digital transformation.

2. Buy-Now-Pay Later Goes Mainstream

With the rise in popularity of online shopping and new generations coming online, the adoption of new payment options is happening faster than ever before. Take, for example, buy now, pay later solutions like Klarna and Afterpay, where consumers can now even convert their homes into a ‘virtual changing room’ by trying before they buy.

The BNPL industry has modernized layaway and installment payments to offer consumers flexible payment options for their purchases. Compared to credit cards, intended to be used repeatedly, BNPL solutions are applied to individual transactions—appealing to consumers who want to make less of a financial commitment, even on lower ticket items.

The pandemic’s impact and BNPL’s overall rise in popularity will lead the industry to rack up $680 billion in transaction volume worldwide in 2025.

While some BNPL solutions are available in-store, they are native to ecommerce checkout, making them more widely available when shopping online. And with ecommerce sales climbing an estimated 44.4% year-over-year (YoY) in Q2 2020, more consumers may choose to use BNPL solutions more regularly, if they haven’t already.

3. DeFi

The essence of decentralized finance is that it is a set of tools and applications functioning in the blockchain network and allowing the user to use a number of financial services that we know from the traditional financial sector, but mostly implemented without the involvement of a central institution (e.g. bank).

As indicated by Fintech Poland, decentralized finances have a huge growth potential. In less than a year and a half (from July 2020 to October 2021) DeFi market capitalization increased from 3 billion dollars to over 200 billion. Adding to these numbers is the potential of the crypto-asset market - today there are already 330 million crypto-asset users worldwide, and the value of transactions on the Etherum blockchain reached $2.5 trillion in the second quarter of 2021.

DeFi seems to be one of the most innovative and fastest growing areas of modern finance. The development of decentralized finance changes the foundations on which the banking system was based for years - it neutralizes the role of financial institutions, balances the level of control of system participants, gives wide access to capital and new users.

4. Cloud for banking

Data, its storage, processing and analysis is the most sensitive part of banking, which is being addressed by the most trusted cloud solution providers and companies implementing them in organizations. Replacing on-site infrastructure with cloud solutions is a natural direction of technological development for banks, which responds to their most important needs.

Implementation of cloud solutions in the case of financial institutions means a significant reduction in expenses on data storage and archiving. Cloud also allows to offload central systems and faster changes to the process or product that is built on it. The biggest challenges can be seen at the interface between new technologies and traditional solutions. This is not only the reorganization of the entire IT, integration of new cloud infrastructure with central systems, but also changes in the operating model.

5. Cross-Platform Services

Digital finance transactions frequently cross over to various other industries such as retail, healthcare, and utilities. On point, the emergence of third-party payment providers such as PayPal and AliPay largely attribute their success to making the most of this phenomenon.

Due to the commonly lengthier transfer process and tediousness of going back and forth between banking apps and other business sites, many consumers are turning to third-party providers who most likely have already made themselves available in growing digital spaces such as e-commerce. In terms of proportion, the global tally of online banking direct payments are 5.3% lower compared to third party payments accounting 39.7%.

By embedding payment services such as developing mobile pay or hybrid wallets available for cross-platform transactions, your business can turn the situation around. Evidence of this can be observed in the growing popularity of Payment Mini Program Integrations within WeChat in China. By integrating services such as payments or transfers as a bite-sized app or service in the multi-purpose WeChat app, many finance vendors have not only increased awareness but also significantly raised their total revenue outside of interbank and intra fintech transfers. This goes to show that in the advent of digitisation spanning industries serviced by the financial sector, visibility will be the key to sustaining business.


DeFi - what is decentralized finance?

Fintech Poland Foundation, in cooperation with Cashless, has recently published a report which aims to introduce the issue of decentralized finance DeFi (DeFi stands for Decentralised Finance). You can read about this new area of financial services market in our article.

What is decentralized finance?

The essence of decentralized finance is that it is a set of tools and applications functioning in the blockchain network and allowing the user to use a number of financial services that we know from the traditional financial sector, but implemented mostly without the participation of a central institution (e.g. bank).

The functioning of the service is coordinated by the so-called smart contracts, i.e. agreements written and programmed in the form of computer code located in the blockchain network. The services which are realized in DeFi model include lending, asset trading, insurance or providing liquidity for exchanges. What is important is the fact that the blockchain technology, on which DeFi is based, allows to omit the link, i.e. a particular financial institution that mediates the transactions. The decentralization of transactions, the absence of an intermediary and the equality of all participants in the register are the features that distinguish DeFi from traditional, centralized banking.

The potential of DeFi market

As Fintech Poland points out, decentralized finance has huge growth potential. In less than a year and a half (from July 2020 to October 2021), DeFi market capitalization grew from $3 billion to over $200 billion. Add to these numbers the potential of the cryptoasset market - today, cryptoassets are already used by 330 million users worldwide, and the value of transactions on the Etherum blockchain reached $2.5 trillion in the second quarter of 2021.

How is DeFi different from traditional finance?

The DeFi marketplace is an innovation of sorts that could soon change the status quo of the financial sector. We outline the main areas of difference between DeFi and traditional, centralized finance:

No middleman

In traditional banking, there is an intermediary between one party and the other in a transaction, with control and full access to the transaction history, such as a bank that provides the full legal, technical and institutional infrastructure.

In DeFi the institution of an intermediary does not exist - there is a single, distributed register of transactions that can be accessed by any user of the system, on an equal footing.

Control over assets

In the traditional approach, funds and client assets are directly controlled by regulated financial entities. In decentralized finance, assets are always under the control of the user, without the involvement of a third party.

Execution and speed of transactions

Transaction clearing and settlement with DeFi is accomplished much more efficiently than with traditional banking - recording the transaction on the blockchain usually completes the settlement process. Depending on the type of blockchain it takes from a second to several minutes, while the settlement of the transaction performed by the clearing house usually takes from a few hours to 3 days.

Regulations

The traditional banking market is heavily regulated, with governance and oversight of the system determined by service providers, regulators and supervisors. The supervision of the operation of the protocol on which DeFi is based is done by the community around the network. Especially in the initial phase, the supervision is performed by
developers. As the network grows, the management system often takes a decentralized form which involves distribution of voting rights
among the community involved in protocol development. Voting on changes is done using so-called management tokens.

Security

Traditional banking and financial applications are vulnerable to attacks
and data leaks both by people from outside and from
The human factor generates the biggest risk of error.

In DeFi, individual applications and protocols are vulnerable to attacks and exploits,
mainly through errors in code and imperfect design of smart contracts.
However, the openness of the code promotes rapid security improvements through
comments from the community. The security of a blockchain network is also directly proportional to the number of people involved in securing the network itself.

Services

DeFi's primary service categories include:

Stable cryptocurrencies (stablecoins) - which are digital currencies whose value
is pegged to the corresponding fiat currencies (currencies that are not backed by material goods).

Exchanges - analogous to traditional stock exchanges, they allow the exchange
and trade in digital assets.

Loans - this service involves the creation of time-limited, interest-bearing instruments that allow users of the protocol to block assets in it and earn passive income, as well as borrowing assets in exchange for interest.

Derivatives - are financial instruments whose value is dependent on the value of an underlying asset or group of assets.

Asset management - includes tools and services that optimize the allocation of asset allocation in an investment portfolio based on variables such as risk profile or time horizon or time horizon.

Insurance -  provides financial protection should a particular event occur, reducing the overall risk associated with a transaction.

Oracles - services that provide smart contracts with access to data from outside the network (such as asset prices underlying
derivative products in the DeFi ecosystem - both decentralized as well as traditional)

Cryptocurrency wallets - interfaces that allow users to manage crypto assets stored in the blockchain. They are divided
into non-trusted wallets (the user has exclusive control over the funds through their private keys) and custodian wallets, (private keys are managed by service provider).

Summary

DeFi seems to be one of the most innovative and fastest growing areas of modern finance. The development of decentralized finance changes the foundations on which the banking system was based for years - it neutralizes the role of financial institutions, balances the level of control of system participants, gives wide access to capital and new users. Like any innovation, DeFi is not free from risks and threats, which grow in direct proportion to the development of this area. Therefore, on the one hand, the financial market should reckon with the potential of DeFi, and on the other hand, the focus should be on adapting the financial ecosystem to the possibilities of decentralized banking and securing a regulatory area that will allow the participants of this market to develop in a safe and legal manner.


BOS & Fintech Futures released industry report "Fintech vs Fintech? The rise of digitalisation in banking"

 

In collaboration with Fintech Futures, we have prepared an industry report on the digitalization process in banking

As Alex Hamilton, editor of Fintech Futures, writes:

"Digitisation has gone from a “nice to have” to an imperative for many in the banking sector, and nothing has quite put fuel to the flames quite like the COVID-19 pandemic.

As customers diversify not just the way they interact with their financial institutions, but also the ways they live their daily lives, so must an innovative company pivot – strategically and technologically – to meet these changes.

Yet now the fintech sector is awash with popularity, mass market adoption, and VC funding. Challenger banks that once counted users in the thousands now count them in the millions. Others wrestle with regulatory frameworks with the same gusto their banking contemporaries do.

Where once fintechs looked on the banks as competition, and now see them as collaborators, or slow-moving contemporaries, what do budding new firms think of those who came before them, the legacy fintechs?

In this deep dive industry report, produced in collaboration with Incat, FinTech Futures investigates whether a new market can emerge, a new competitive scene where fintech battles fintech for the scraps."

From this report you will learn:

  • How customer demands are laying the groundwork for new fintech strategies
  • Whether the super app is the right strategy for the future
  • How to overcome the challenge of time-to-market
  • Is it really fintech vs fintech in today’s industry?

Additionally in the report you will find a commentary by our CEO - Piotr Hanusiak, who indicates what is currently the biggest market challenge for fintechs.

The report you can download here: https://bit.ly/FintechFuturesReport.


A revolution in the approach of fintechs - from a simple payment card to a broad set of services

1st July marked the 6th anniversary of Revolut, one of the first fintechs to offer modern payments for the B2B and B2C markets. In 2015, what Revolut offered its customers was perfectly consistent with its name - simply revolutionary. Today, however, the use of modern payments is almost a standard, as fintechs are outdoing themselves in expanding their offerings with products and services that many traditional banks would not be ashamed of. What has changed in the approach of fintechs and why, and what does it mean for the financial industry? Let's find out.

PSD2 and greater trust for fintechs

Much has been said about the role of PSD2 in modern banking, but it is impossible to take up the topic of fintech development without setting it in a regulatory context. Because it was the implementation of the PSD2 directive that not only allowed intermediary entities such as fintechs to gain access to customer data, but also gave an impetus to traditional banks to undertake broader business cooperation with modern financial entities. Formal issues aside, however, PSD has allowed for something more - for fintechs to be treated as equal to banks and as trustworthy market players, and this has opened the way for fintechs to offer more advanced services and products.

 

MVP versus a wide range of financial services

As a result of these changes, we are seeing fintechs starting to move away from being a single-service provider to offering multiple payment products, dedicated to different target groups and fulfilling different business objectives. The aforementioned Revolut started with a payment card, whose main distinguishing feature was the simplification of setting up an account and payments between recipients and lowering the costs of international payments through attractive currency conversion rates. The fintech started with MVP - a single, simple solution that, on the one hand, allows to verify the business validity of the idea and inspire confidence in the market, and on the other hand, facilitates the creation of a customer base to which new products and functionalities can be offered in the future. Because today Revolut is not just a payment card - it is also a range of modern solutions, starting with savings accounts, cryptocurrency exchange, affiliate programs, and ending with credit products.

The same is true for the ZEN.COM, which in late 2020, in partnership with MasterCard, debuted its payment card offering protection for online purchases. Today, after only a few months, ZEN also already offers "zenefits" among which we find, among other things, an additional one-year guarantee when buying electronics, instant cashbacks, and the possibility to use a multi-currency account and transfer money at no additional cost.
Expanding the range of financial products allows you to build long-term customer loyalty and commitment to one entity. By choosing an application in which almost everything can be done, the customer does not need to look for alternative solutions that provide additional functionalities, because all services are available in one place, seconds after logging in. And yet, what fintechs have won from the beginning is simplicity, achieved through limited functionality, intuitiveness and ease with which customers can use the offered functionalities.

 

Technology that gives you a business advantage

However, these advantages would not be realised if it were not for modern technology, which forms the basis of solutions and products offered by fintechs. Every financial institution bases its operations on a transaction system, which - in the simplest terms - processes and organises data about clients, their accounts and transactions. So far, the role of transaction systems has been limited primarily to functions that enable efficient financial activity, in a manner consistent with compliance. Recently, however, the role of transaction systems in shaping fintech products and services and in supporting marketing and product development has grown significantly. Today, a transaction system is important not only from a technology perspective, but also from a business perspective, because a fintech's advantage is also determined by its ability to implement new business functions as quickly as possible and to respond to new customer needs by efficiently expanding its already existing product offering.

INCAT, the provider of BOS, a modern transaction system dedicated to modern financial entities such as fintechs and challenger banks, knows this very well. BOS developers have noticed that fintechs need solutions which, regardless of their original application, address the requirements of a modern end client in the customer centric model. Thus, modern financial entities today need core systems whose functionalities are not only focused on the technological and product layer, but also support an innovative approach to processes addressing customer needs. Customers of fintechs today are primarily looking for services that allow them to perform various financial operations in a flexible and efficient manner, making everyday financial management easier and more attractive.

 

Technological solutions building the marketing advantage of fintechs

INCAT offers specific products that are ready to be used for financial activities, and these include affiliate programmes, automated cascading currency conversions or support for white labelling (multi-brand).

Affiliate Programme

BOS is used when creating a service such as an affiliate programme. Thanks to this functionality, entities offering their customers a system of collecting points, gaining discounts or fast cash refunds, can build long-term loyalty of their recipients. The system supports this solution through an extensive and flexible possibility of defining online shops linked with a financial institution, together with a set of parameters defining the conditions for the operation of loyalty programmes.

Currency Cascade

This is another example of a very interesting solution offered by BOS, which makes it easier for customers to make payments in non-standard conditions. The currency cascade allows the customer's funds, accumulated in different currencies, to be used automatically during the execution of a single transaction, if there are no funds in the main account or the account held in the currency of the transaction.

In other words, if a customer makes a payment of EUR 40, but only has EUR 30 available in his account, the payment system automatically draws the missing funds from the customer's other currency accounts, e.g. in USD or PLN, making an immediate currency conversion. The entire process takes no longer than a standard contactless payment and does not require any activity on the part of the customer.

Multibrand

Multibrand is a functionality which enables the separation of independent environments of several different brands and institutions, administered by a single entity, within a single instance of the BOS system. This is a great solution for institutions that decide to offer products addressed to diverse target groups and different market segments. An example of the use of this product may be offers of large loan companies which, in order to expand their customer portfolio, create several different loan brands, differing from each other in parameters and terms of obtaining financing, while still being formally a part of one large capital group or, conversely, not having any business relations.

The examples cited above are just a small sample of what can be achieved in the development of financial products with a modern transaction system, whose open architecture and adopted solutions allow for their rapid implementation. This is especially important today, in the era of open banking and huge competition on the fintech market. Fintechs already know that it is necessary to use advantages in all aspects of the business and support their offer not only with a creative approach, but also with technology that will keep up with customer expectations and trends that the market is constantly creating.