The Finnovate Show
The Finnovate Show

Episode · 11 months ago

Richard Goyder: Using Banking-as-a-Service to capitalize on trends in financial services

ABOUT THIS EPISODE

More and more banking consumers are leaving their traditional providers behind to satisfy their evolving needs. Non-traditional providers are challenged to scale their operations. All is being driven by dramatic technology advances and innovation that is taking place all over the world. Richard Goyder, Head of Value Proposition for Finaptic Technologies shares his experience and a unique business model that enables Canadian financial services providers, big and small, to keep pace with change, adapt and grow in response. 

...as a leader of your company, you must stay up to date with your strategies and execution or risk obsolescence. Welcome to the Fin of a choux financial services innovators bringing you the future today and now here's your host, jerry Purcell. It's The fin of eight show brought to you by Innovation three 60 group. I'm jerry Purcell. Get ready to think about your biggest challenges and capitalize on your biggest opportunity after this. Executives depend on external consultants to fill knowledge and experience gaps or to have an experienced mine audit. They're thinking the Innovation 3 60 group brings together a wide range of proven thought leadership from around the globe and cost effectively makes it available to you, get the insights, advice and systems you need to succeed, learn more at www dot innovation 3 60 dot com. Our guest today is Richard Goiter. Richard is head of value proposition and fanatic technologies. He's a seasoned financial services executive who has both developed strategy and been responsible for delivering it for almost 30 years. Richard has more than a decade of experience as an executive at a large bank with responsibility for sales, automotive finance, personal lending and strategy, notably before and after that, Richard had been an entrepreneur and consultant in europe and Canada, both and more recently focusing on the harvesting and usage of data and ai. Lately, Richard has been hidden away for almost a year with the fanatic team developing a unique banking as a service offering. Today they are ready to pull off the covers and tell the world about what they've been up to and especially how their solution will transform the way the Canadians bank. Welcome to the show Richard, it's a real pleasure to be here jerry. Thanks for having me on. Let's start by casting our minds back to the times, you know, prefect haptic when financial services had to deal with the environment that existed at that point. Tell me about the lay of the land back then. Well, I think the factors that were most important to us were to change is that a direct result of the effect that technology is having on the financial services business? Um The first of those we see is the growing willingness of consumers to access banking and other financial products from non traditional providers. So rather than going to a bank or insurance company for everything, they're dealing with these fin tex and neo banks, whether it be for traditional banking products, like a payment card or a bank account or you know, some of the more recent innovations like Buy Now, Pay Later and the payment services of you know, an...

...apple wallet or google pay or that kind of thing. The second big change that impact was bringing to financial services was the impact on the underlying infrastructure or the environment, Things like open banking. The introduction of real time payment rails. So the combination of these trends is drastically changing the way financial services works globally. Those trends have been to some extent slower and somewhat mitigated in Canada for a whole variety of factors. So that meant that Canadian consumers weren't necessarily seeing the same benefit from those changes as consumers in the rest of the developed world War. But also there's a real risk that as those innovations did come to Canada it wasn't going to be Canadian players who took most advantage of them but it was going to be international companies with experience in other markets who would come into Canada and get those benefits for themselves. So we really looked at that and took a view that we must be possible to build a modern banking platform which took full advantage of those underlying changes and enabled Canadian consumers to access financial products the way they wanted to access them through non traditional providers, but also help Canadian institutions access those consumers by being able to deploy their balance sheets and regulatory licenses through a modern system into those non traditional channels. I was surprised when I look back at, because I've known you for a long time, how long you've been in the business? I've been there almost as long as there is actually more than you, but it seems like almost as long. But what I do know is that making changes in financial services can be really hard and particularly when you're related to a new business model, it could be the most difficult of all. What what were the challenges that you and your team faced as you embarked on this new strategy? Well, I think the first thing that really strikes you when you're creating something like this in the world of financial services is how different that is to traditional startups, where, you know, often there's an opportunity to try something out through it together, launch it to the market and have your first users basically be your beta testers for you in financial services. There isn't that option, you know, there are regulatory controls, you're dealing with other people's money, you have to have everything robust and really nail down before you contested on the market. So we realized very quickly that a lot of hard work had to go into not just the functionality of the platform, but also making sure that things like cybersecurity privacy, regulatory controls were all absolutely robust. Before we could launch it to the market, which means the development cycle is a lot longer than it is for for many startups, um that said, I think, you know, the big challenges, The first one was to find a suitable core system that we could build our platform on and recruiting a team which combined not just the technological skills to build...

...something at the cutting edge of technology, but also had enough background and experience in banking and financial services to understand the particular requirements. And once you're there, it's all about putting in the time and the hard work to build something that's really robust, really stable, but which brings those new capabilities to the market. What I find is that having the idea is it seems like the hard part, but actually the hard part is getting clients to help you understand how you're going to make that soul, So how did you interact with potential clients and how did you sort of get their feedback and input into the offering that you're looking to put into place? Well, I think those members of the team like myself who have worked in financial services for many years were already acutely aware that there was demand out there for these kinds of functionality and services because we had worked in institutions which had struggled to deliver them and within the constraints of legacy systems and existing regulation and controls. So the demand was already out there and was pretty clear, you only have to look at other countries outside Canada which were maybe somewhat further along. And you can see that, you know, the consumers adopted these services in large numbers, they were very quick to move their money into these new fintech providers. And whilst there were some obstacles which are unique to Canada, they're not insurmountable. There was just challenge of actually overcoming them and and finding ways to deal with them since launch, I think that's absolutely been borne out. Everybody we speak to seize the need that we're addressing, sees the need to provide products in this way and is really enthusiastic about the approach that we've chosen to take. So tell me a little bit more about fanatic. So we were founded last summer in july, so we were absolutely a pandemic company. Most of the team is in Montreal on Toronto, but that said, we have employees all the way from the rockies to the atlantic and and some of them are even south of the border, so, you know, and most of whom I've never met in person, of course, our founders, three founders came from banking and technology backgrounds. We are strictly B2B business. We aren't planning on having our own consumer brand or our own end customers were here to enable other companies who have customers of their own to provide them with banking products. So our partners don't have to worry about diluting their brand with a co branding deal or worry that we're going to try cross marketing to their customers. We are simply there to provide them with a platform fully embedded in their own customer experience. We have one of the scotty banks As a partner, we'll plan to add additional banks and balance sheets as we go, but they currently provide us with they're banking license access to...

...their balance sheet and their funding. So we're in a position to price competitively against the major banks for our partners. We we currently provide deposit accounts were an interact member so we can do the money transfer activities were on the Mastercard rails and we're building all the other a hefty bill payment deposit capture products to support that. And towards the end of the year we'll be launching our first credit products. And all of this is built on an entirely cloud based real time event driven system. It's all a. P. I. Exposed so it's easy for our distribution partners to embed that into their own existing app and their own existing user experience. Very interesting. So a broad set of offerings that goal to be the provider for everything in effect. Absolutely, we we we will continue to expand the range of our offering until we're providing the full range of banking services for consumers and eventually for small business as well. So why would a client want banking as a service versus some of the other business models that are in place today? Well, the, I think the already mentioned the issues around co branding and cross marketing. I think, you know, the the banks as they are, do have partnerships deals where they provide a banking products to people, but they, you know, have an interest in building their own brand and their own customer base and it's obviously rests on their legacy platform. So we're producing an offer which gets around that by being built on a modern platform and isn't a branded offering, it's purely white label. The other thing to say is that the people out there in the market who have gone about building their own banking offering or constructing and sort of banking service offering have had to construct it from a huge stack of suppliers. So when you think about the need to do everything from onboarding with ID verification and anti money laundering, accessing the credit bureaus, having a core banking platform, interacting with the payment providers in the different payment rails and the card issuers and the payment processes. And then on to all the back office pieces about running your own finance and Treasury functions, doing your clearing and settlement as somebody who's in a consumer retail business, that's an awful lot of providers to put together and figure out in order to create that banking offering what synaptic is bringing is all of that in one end to end package. So we've taken care of assembling all of those external providers. We've built an awful lot of the functionality ourselves on our own dedicated platform so that it's really easy for somebody who wants to offer banking products to their customers to plug in and do that without having to take on regulatory licenses, build a balance sheet, line up, you know, a dozen or more separate service providers. I think the other piece around this is obviously if...

...you're wanting to offer banking services, trust and security are incredibly important to that offering. You know, it's a key marketing point of the existing Canadian banks and it's certainly something that consumers feel very strongly about if they're going to trust their money to you, they want to know that you're reliable. So, again, one of our advantages is as we build a purpose built platform, we've been able to design in things like security, privacy, data, security from the ground up. So that's all entirely integral to the way our platform is designed and built, rather than being something that we have to layer on top of an existing legacy system. The world is moving fast. It's difficult to keep up. Your executive team routinely needs new ideas to keep them ahead of the competition. Imagine having a plan in place in 30 days to focus your innovation efforts, improve customer experience, accelerate your move to digitization or increase speed to market. Our guide to accelerating your innovation agenda provides you with insights and time saving resources to plan your path forward, contact jerry to book a quick call or for your complimentary copy at www dot linkedin dot com backslash in backslash jerry Purcell, G E R R Y p U R C E L L or email jerry at jerry dot Purcell at innovation 3 60 group dot com. So when we start off on these kinds of initiatives, we often have a view of what we're trying to accomplish and and now you've got a year under your belt. What's changed in the way you look at your business. If anything? I think one of the things we, we we are fundamentally a technology company and uh, you know, a primary approach to this is one of building the right technological platform. I think one of the things that we've learned as we talk to potential partners out in the market is actually how much of the banking product we actually have to explain and sell. So you know, again, you know, people like you and me jerry spent many, many decades, I'm afraid in the banking industry are very familiar with the products, very familiar with how they work, very familiar with what the potential offerings are. Many of the potential partners aren't in financial services, they aren't in banking, they just know that they have a set of customer needs they would like to meet. So we've had to put a lot more time into working with potential partners around what those offerings might look like. Again, we have a broad range of capabilities on our platform. So, you know, we can we can do all sorts of things, but helping our partners figure out what the right offering for their customer base is. Something that we've, you know, we're learning to do a lot more of I think interestingly as well, I think if you'd...

...asked me when I first started out with the guys, I would have said that credit cards was probably the, you know, probably the most popular offering. That seemed like the thing most people would want. But in practice, what we found is partners are very interested in offering full function transactional accounts to to take on the day to day banking activities of their customers rather than necessarily getting into the credit space. So it sounds like one of the benefits you bring to your clients is the depth of understanding you have of the industry. And I would imagine overtime, or at least in the past situations, you see clients of these kind of services deciding at some point, they're just going to cut it and take care of it themselves. So how do you remain relevant or what is it about Synaptic that will remain relevant for for your clients? So that they will be your client for the next 20 years? Well, I think the first thing to say is that what we know about the financial services businesses, what drives profitable and successful banking businesses are lifetime relationships. So that's something we work very hard with our partners on is building products and and and and the way we construct our contracts with our partners to make them about the value of the lifetime relationships that they're going to create, because that's how you generate value in the banking business, given the complexity of the platform that you have to build to do banking, given, you know, things like the need for a regulatory balance sheet and funding, I think it unlikely that many of our partners are going to get to a scale where that would be worth building themselves. You only have to look at the Canadian banking market and see the size of the players in that market and realize that scale in banking is really quite significant and really quite material. So our ability to provide a link between those large balance sheets, organizations and the retailer, you know, the person with the consumer relationship who wants to provide banking products, I think is a sustainable model and not one which companies will easily replace themselves, you know, when they reach a certain scale. So, yeah, we we will also continue to grow and develop our offering. So, as I mentioned, you know, we'll certainly want to complete the full range of consumer offering and and expand that into the small business arena and provides small business functionality for those of our partners who want to offer that. Well, absolutely have plans to expand internationally into the US and beyond. And then the other thing that we intend to do as our platform matures and is clearly has the full range of product is to offer it to banking institutions as a, you know, as a way of modernizing their platforms. So rather than banking is a service offer them infrastructure as a service. So they would obviously continue to provide the balance sheet. They would continue to do their own underwriting, they would continue to do their own Treasury operations, but we would provide them with our, you know,...

...state of the art platform for them to run their products on. So I think there's a long runway for our product in my experience in across industries, actually, the best of any industry are really those who learn how to collaborate and influence change. And in the Canadian market, which I have a fair bit of exposure to. Traditionally, there has been resistance, traditionally, there has been established competitors trying to stifle innovation. So what's your plan and how do you maneuver through what has to happen in the banking going forward for your clients? Well, I think the approach we take to that is we see ourselves as enabler for all participants in the market. So it's not just about allowing retailers or utility companies or wealth managers or whoever it might be to offer banking products to their customers. It's also about providing a way for banks to continue to access those customers by giving them a route for their balance sheet. Um and they're, you know, funding capabilities into those markets by giving them a platform which can support that kind of innovation. So the competition is absolutely always there and it's a good and it's a healthy thing and it's a thing that will drive innovation in this market. And we're very happy with that. But I think we absolutely see ourselves as an enabler for both existing institutions who are looking to find new ways to access customers and serve those customers where they want to be served, as well as supporting those, you know, consumer businesses out there who want to add banking products and embedded in their customer experience. So, from the point of view of banking as a service, where do you see the industry going and what kinds of things are going to change over the next five years? Well, I think it's pretty clear that the nature of banking is a separate activity. That, you know, we go to a particular bricks and mortar outlet or a particular website to engage in is going to change and banking is going to become far more embedded in other activities. And I think the whole been now pay later trend is an excellent example of that where you no longer decide you want a product and if you need to take out a loan to pay for it, you go to another organization and get a loan from them and then go back to the retailer to purchase the product that you wanted. I think, you know, buy Now Pay later is a good way of showing that that that's now just embedded in the retail process. You see something you like, you click on wanting to buy it and you are offered the option of paying it all up front or maybe splitting it over four easy payments or whatever it is. And you know, it's not a separate process, it's all embedded and I think other activities, you know, whether it be moving money, whether it be paying your bills, whether it be optimizing your tax position and completing your tax turn, these are all going to become far more embedded in in the activities that we do. So I think...

...that's absolutely where the financial services market is going and something that, you know, we're very keen to support and whether it be building the functionality into our own platform or creating the capability to access other services through our platform. We certainly intend to support all of that. So one of the benefits of having gray hair as we get to give people advice. So what our last question usually in our podcast is, you know, what kind of advice would you give to financial services expects? You know, thinking about their businesses and in the future? Well, thanks for calling me out for the gray hair on a podcast jerry. It's always, it's always a pleasure to catch up. I think what I would say is that as technology changes really fast and in an industry like financial services, which is heavily regulated and has a lot of compliance requirements, it's always important to remember that what the customer wants is the most important driver. I think when you operate in a regulated industry, it's very easy to hide behind that and give the customer what you can give them, tell them that they have to accept what's available, whatever it is. But at the end of the day, you're only going to succeed if you truly understand what it is that customer wants and you go a long way to meeting that. You know, I think the winners in financial services will be the ones who understand what customers really want to do with their money, really understand how they want to use it and when they want to have access to it and the and the ones who lose are going to be the ones who think that they're operating in a protected environment where you know, the motive regulation will, will keep the competitors out because technology ensures that that's not gonna happen. Um And so, you know, I think, you know it's it's a cliche but it's it's cliche because it's absolutely true, the customer is always right and if you understand what the customer really wants, which isn't necessarily always what the customers say they want because the customer may not, you know, have greater knowledge and insight than you do. But if you can understand what the customer really wants, then you're a long way to success in any industry but financial services, especially gray hair or not. That's uh pretty thought provoking. Thanks. Thanks Richard. So that wraps up this episode. And as always, I look forward to hearing thoughts from you, our listeners about today's show. Please keep the conversation going. And if you like to show, tell your friends and please take a minute to radar show or to post a comment, go to www dot innovation 360 dot com or your favorite podcast site to find out more and to listen to more shows. Richard, thank you very much for taking the time to chat with me today. It was a real pleasure jerry, Great talk. Stay safe and we'll see you all next week. Thanks. You've been listening To the fine of...

...eight show with jerry Purcell. If you like the show, share it on your network and subscribe on itunes or wherever you listen to podcasts and you can go to www dot innovation 3 60 dot com. To listen to more shows, download the transcription from Today's show or to contact today's guest. This is the Innovate Show, Financial services innovators bringing you the future today.

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