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Digital transformation – Feeling the competitive heat

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A leadership Forum at RiskMinds International 2022 spoke about the generational shift sweeping financial services as the industry gears up with FinTech to meet enhancing customer expectations.

Meeting customer expectations and the smart use of financial technology (FinTech) was the topic of a lively panel debate held at RiskMinds International. Consumers have grown more discerning and financial firms face a generational challenge to keep up.

“The customer journey is the important thing when competing with the traditional banks,” said Arturo Zamarriego, Chief Financial Officer and Chief Operating Officer, Divilo, a Spanish payment institution launched at the start of 2022. “You’ve got to simplify processes, so that the customer can download your App and accept payments in just 24 hours,” he said.

Carolina Thomaz, CRO at Sygnum Bank AG, joined Sygnum in 2021. Sygnum is the world's first digital asset bank. The startup asset manager, licensed in Switzerland and Singapore, was the first digital assets bank to get regulatory approval.

Carolina summed up the dilemma facing some financial institutions. “The challenge is how can we can change culture to keep up with technology and not fear the unknown, because there is a risk of not trying to assess something for many years simply because it is unknown to us.”

Carolina also addressed the challenge of competing with bigger traditional rivals. The first layer to this is client centricity, she emphasised, with client relationship managers in contact with customers to assess the suitability of new technologies for consumer needs.

Just as important, she explained, is the need to get the balance right between product speed and customer service, and meeting compliance obligations. The link between the layers is vital to get this right, she stressed. You need to be agile and still be a regulated institution,” Carolina said.

You need to be agile and still be a regulated institution,” Thomaz said. “A startup is small compared to the banking giants, and we need to keep our regulator updated on new technology and seek approvals in some cases to deploy new products.”

Outsourcing strategy, relying on other fintech service providers, is one route to efficiency, Thomaz noted, but acknowledged that careful management of partner relationships is vital, as regulators will confirm that the risk cannot be outsourced along with the service.

The panellist who travelled furthest to the Barcelona event was almost certainly Frank Versace, CRO, Judo Bank, based in Melbourne, Australia. Judo’s credo is to focus on human interaction in client relationships.

Judo’s business model is focused on reintroduction of the highly capable, skilled relationship banker. Culture is a critical factor in success, he emphasised, but the company’s approach aims to find efficiency in internal processes.

“People want to deal with a human being,” Versace said. “We don’t want to give up the tech gains we have gained, but our aspiration is to harmonise those two things, which is what has given us competitive advantage.”

Attracting people with a mindset predisposed to change is one major challenge, he suggested. IT security and data risks are paramount for him, Versace underlined. He noted that startups – in his case Judo is five years old – have to make choices about what to prioritise at different stages in their growth.

“When you start with a blank sheet of paper you don’t get to do everything at once,” he said. “The velocity of change is quite immense, and the people to implement that change, such as for changes to your core banking system and doubling workforce every 12 months.”

Zamarriego made another point for small but growing startups allocating their priorities while scaling up: price is unlikely to be their unique selling point to beat larger rivals. “You can adapt to clients and take decisions quickly, but you cannot compete by pricing,” he said. “Instead you need to demonstrate more value than a traditional bank. We can let customers do things quickly, and press that advantage relative to our competitors.

All panellists agreed the market outlook is rocky going into 2023. Price will become more of a squeeze during a downturn, Zamarriego noted, as more customers feel the pinch.

“As well as the increasing difficulty of raising capital, we have to acknowledge that customer behaviour is changing, putting more focus on price,” he said. “As FinTech startups, that is unfortunate for us. It will put pressure on pricing model, but it is difficult to forecast how much.”

Want more insights from RiskMinds International 2022? Download our latest eMagazine below to explore exclusive interviews with CRO and key speakers, articles, survey results and much more!

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