Market-leading benefits are a sure-fire way to woo customers to your new current account – but generosity comes at a cost.

So, for Kroo Bank, harnessing AI to ensure ruthless efficiency is absolutely crucial.

“The flip side of the coin of being good for our customers and passing on as many benefits as possible to them is we have to be very lean operationally,” says the business’s chief technology officer Alexey Gabsatarov. “Whatever efficiencies we can find, we need to consider them. One way is automating all the manual processes we can, and that means using AI extensively.”

Established in 2016, it took Kroo Bank until June 2022 to gain its UK banking licence. It launched its free current account six months later, swiftly followed by personal lending, and the 100,000 customer milestone was passed by June 23 2023. At the end of last year, it had 152,055 accounts and a combined credit balance of £788.2million.

Ambition and focus

Kroo targets Gen Z and millennials with customer referrals and social media advertising driving recognition – brand building being in co-founder Nazim Valimahomed’s DNA after a lifetime promoting big-name FMCG businesses, such as Coca-Cola and Heineken. There’s a similar vision behind Kroo – to create a highly consumable bank that can nail the rankings.

Valimahomed has already said it’s out to beat Starling’s banking-licence-to profitability roadmap, which took six years. Gabsatarov says the “difficult bit” of creating a current account is now done and additional products will be added as the firm progresses. But while he is confident that profitability can be achieved in the “not-too-distant future”, a £26.8million loss in 2023 means the hunt for operational efficiency must be laser-focussed.

Kroo’s current account pays 4.1 per cent AER on balances by tracking 0.9 of a percentage point below the Bank of England base rate (the margin will rise to –1.1 from late November). That, together with an account app that allows customers to easily split bills with friends, save into pots and enjoy low costs when spending abroad has won the bank praise among pundits.

“We are quite open about the way we use AI and we want to ensure our customers trust us to do it responsibly”

Gabsatarov says: “You may think that a new bank won’t have many manual processes but there’s so much heritage complexity in the way banking operates that automation is a continuous effort for us. It’s important to ensure our AI models run on good quality data – if bias or data quality issues are introduced we see issues downstream.

“From the outset, we’ve adopted ethical AI principles by always having a human in the loop. We’re not replacing humans with AI, the way we see it is we complement specialists with generative AI input that makes them more efficient.”

The bank uses both general and specialist AI systems, says Gabsatarov, as both have strengths and weaknesses.

“Using a large language model can be like interviewing someone who is very smart but who’s not a specialist, so they’ll talk around the topic,” he explains. “It’ll make the answer sound plausible, but ultimately incorrect. Training a specialist large language model counters this problem – you don’t expose it to irrelevant data. We are open about the way we use AI and we want to ensure our customers trust us to do it responsibly.”

Another efficiency win has been reducing customer queries about transactions via a partnership with Snowdrop Solutions. Snowdrop’s software means account holders at partner banks can see merchant names and logos on transaction data, plus the payment location and merchant contact details. It means the bank fields fewer queries from people who don’t recognise a transaction they’ve made and fear they’ve fallen victim to fraud.

Simply adding a logo and location reduces ambiguity and stops misunderstandings from becoming a drain on staff time.

Gabsatarov says: “We launched that a year ago and we’ve seen a 15 per cent increase in customer engagement with that data and a reduction in customer support queries – it’s improved user experience.”

Another user experience Kroo is developing is automated financial advice, or as Gabsatarov explains, “automated nudges and recommendations that would make customers demonstrably better off.”

Neos the world over have adopted similar PFM tools to a greater or lesser extent, but Gabsatarov says Kroo goes further: “People engage with current accounts as individuals but increasingly spend in a social context. So they travel together, live together and spend together. Capturing and serving this element was an important foundational principle for us, and it was a differentiation of ours.

“We’re working on savings products, lending products and so on – adding products that our customers ask for and see value in. Being a small bank we can react to changes and build the business by listening to customers.”

This article was published in The Fintech Magazine Issue 33, Page 11

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PayPal is one of the original fintechs, having pioneered the digital wallet and changed the way we shop and pay online.

For some pioneering companies, that initial spark can dwindle as new disruptors enter the market. But PayPal isn’t resting on its laurels. From a position of influence and healthy balance sheet, PayPal’s corporate venture capital arm, PayPal Ventures (PPV), invests in exciting startups at Series A and B stages across the globe in multiple sectors including fintech, payments, commerce enablement, artificial intelligence, blockchain and cryptocurrency, and regulatory/cyber technology.

PPV has been investing since 2017 and has a physical presence in San Francisco, New York, and London, with more than 70 companies in its portfolio. This has included the likes of Divvy, Paidy, Plaid, Raisin, Tabby, Tink, and more. It has a global geographic investment mandate with a core focus on the US, UK and Europe, as well as key markets including India, LATAM, the Middle East, Africa, and Southeast Asia.

Partner Ashish Aggarwal has been with PPV since the beginning, with a focus on EMEA and APAC. We sat down with him at the Fintech For Inclusion Global Summit organised by Accion Venture Lab to chat about financial inclusion and whether AI really is going to take over the world.

The Fintech Magazine How has PayPal’s impact as a global company had an effect on its corporate venture capital arm?

Ashish Aggarwal “Broadly, PayPal’s reputable global brand enhances our portfolio companies’ credibility with customers, potential investors, and regulatory bodies.

“On the Ventures side, we leverage the breadth and depth of expertise within PayPal to add value for our founders through multiple layers of support. We provide portfolio-level programming and opportunities for founders to leverage PayPal’s expertise via a dedicated Advisor Network, which includes seasoned executives with extensive knowledge and experience across critical areas such as product development, technology, human resources, government regulations, and marketing.”

The Fintech Magazine What role does tech play in developing financial inclusion?

“Successful fintechs have not only promoted financial inclusion, but actually expanded the total addressable market of financial services”

Ashish Aggarwal “Innovative fintech startups are helping build a more financially inclusive world by expanding access to credit and other financial services to customers in emerging markets, as well as those who have not traditionally been serviced by incumbent financial institutions (FIs). Historically, these FIs have faced challenges in servicing customers and small businesses with low transaction values due to high servicing costs, often caused by manual processes and limited technology adoption.

“Successful fintechs have not only promoted financial inclusion, but actually expanded the total addressable market of financial services by offering a broad spectrum of products – including bank accounts, payment processing, savings, and insurance – to hundreds of thousands of underserved merchants and consumers worldwide.”

The Fintech Magazine What’s the business case for financial inclusion?

Ashish Aggarwal “Being unbanked doesn’t necessarily mean a customer lacks creditworthiness. In many cases, particularly in developing markets, traditional institutions are unable to underwrite due to a lack of available data. This is why we consider digital payments to be the foundational layer.

“Take India’s instant payments system, UPI, as an example. Its widespread adoption has transformed cash transactions into digital ones, creating a traceable record of financial activity. This new data enables fintechs to assess creditworthiness based on a customer’s digital financial footprint, driving a positive cycle of financial inclusion.”

The Fintech Magazine What does PPV look for in founders and startups?

Ashish Aggarwal “We assess founder-market fit, market size, and product- or distribution-led competitive advantages, among other factors. As we typically invest at the Series A or B stages, we expect startups to have a good sense of their unit economics by this point.

“Additionally, we are biased towards business models which have the potential to scale across multiple markets. While this isn’t mandatory, broader applicability can provide a strategic advantage.”

The Fintech Magazine Finally, how much will AI be a central feature in creating the next big fintech unicorn?

Ashish Aggarwal “The pace of evolution in this space is remarkable. AI is emerging as a significant driver of efficiency across various functions, including customer service, risk underwriting, operations, and more. While there are still questions regarding ROI and accuracy, both metrics are improving as the costs of running large language models (LLMs) decrease and their accuracy increases.

“What excites us most is the potential to leverage AI to expand addressable markets by either targeting new customer segments or launching products that were previously unattainable. We are actively investing in AI and closely monitoring new and emerging business models.”

This article was published in The Paytech Magazine Issue 13, Page 38

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Despite being the home to Visa and Mastercard, there has always been a strong resistance in the US to a “cashless” society. Massachusetts became the first US state to ban cashless businesses in 1978, requiring all retail establishments to accept cash payments – and it has been rigorously enforced, even during the COVID pandemic. Major cities like New York, San Francisco and Philadelphia have recently passed local laws requiring businesses to accept cash as payment.

Mastercard infamously declared a “War on Cash” in 2010 but with the implementation of “Prohibition of Cashless Establishments” regulations in New York City in 2020, that “war” doesn’t even have the support of the major city in their home state!

The authorities clearly decided the interests of the public – their voters – took precedence. And no American politician can be in any doubt as to what the public sees as being in their interests when it comes to cash. A survey from neobank Chime in September 2024 revealed that only five per cent of American adults never carry cash and over 50 per cent still believe “Cash is King.” Furthermore, a whopping 88 per cent don’t want cash removed as a payment option.

I visited The Big Apple this month to find out how the “cashless ban” is working out in practice, four years after being passed.

Buses 1 Ice Cream 0

The first cash “high” I experienced was on the New York buses. The local operator long ago found a convenient way for cash to be accepted, without the driver having to handle money. Since 1969, bus riders have been able to deposit coins for their fares directly into the fare box, allowing drivers to concentrate on driving instead of multitasking. Fifty-five years on, cash continues to be accepted on New York buses.

On the other hand, in 2022, Van Leeuwen IceCream earned the dubious distinction of being by far the worst breakers of the cashless law in New York City. By October of that year, Van it had been fined a total of $107,250, compared to $98,725 for all other 56 offending businesses combined. Van Leeuwen ultimately agreed a settlement with the New York City Department of Consumer and Worker Protection and met their legal obligations.

Yet, the business still doesn’t accept cash directly but instead, as is rather oddly permitted by law, they have installed “Reverse ATMs”. Those who want to use cash have to acquire a card from these ATMs and use it to make purchases.

These cards – rather provocatively branded “cashless” – are hardly user-friendly. They are not reloadable, no receipt for the transaction is issued at point of sale, and balances left on the card have to be reclaimed from the issuer in a time-consuming process. After three months of non-use, a charge of $3.95 a month is imposed and deducted from any balance on the card. And if the “Reverse ATM” is not working – and I saw examples of this in New York – cash users cannot make a purchase.

This is surely not the outcome envisaged by New York legislators when they passed the law.’

McDonald’s and Sweetgreen

McDonald’s shows the way when providing genuine payment choice in New York, with cash acceptance machines alongside their ordering screens. Sweetgreen too has played its part. The first Sweetgreen restaurant opened in 2007 delivering “reimagined fast food”. They have only made one false step – going cashless in 2016.

However, in 2019, knowing a ban was coming, Sweetgreen reversed this decision and quickly moved to accept cash again. And not just in New York – at all their over 200 stores around the US. When I visited the Sweetgreen branch at 86th and Broadway in Manhattan, it was a delightful experience. There was a warm welcome from the team in the branch and, when the time came to pay, cash was greeted with a smile and an “of course we accept cash. No problem!”

The whole experience, including paying, could not have been better. And the food? Delicious!

Summing up my NY City experience

Firstly, the local politicians did absolutely the right thing in passing legal measures to prevent cashless being imposed on the consumer. The 88 per cent of the US public rejecting the notion in 2024 is in line with results delivered by YouGov when surveying the British public in 2023. Secondly, forcing the public to acquire cards via a Reverse ATM is NOT truly respecting their legal right to pay using cash.

It is simply another attempt to impose cashless.

Thirdly, if businesses innovate in terms of cash handling – as the New York bus operator did way back in 1969 – delivering payment choice can be easy for the public and businesses alike.

In fact, by copying Sweetgreen, ALL businesses can hit the payment choice sweet spot!

This article was published in The Paytech Magazine Issue 13, Page 62-63

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For a while now, Revolut has been one of the big European and UK neobanks. Challenging the established order and providing a fully digital, accessible user experience and new exciting products for the modern consumer.

Amongst a small crowd of similarly disruptive companies, it’s now officially the largest challenger in Europe and has a presence around the world too. The digital-only bank recently announced 10 million customers in the UK, bringing its customer base across Europe to 45 million. After finally receiving a long anticipated banking licence from the UK Prudential Regulation Authority (PRA) in July 2024, it is now eating up more market share, from incumbents.

A new retail wealth and investment platform was recently added to their competitive offering. Does this change of status and the similar growth of their competitors mean we’re entering a new era of challenger banking?

One sign of maturity in banking has to be the presence of a formidable business offering. This is certainly the case for Revolut, with the most recent global annualised revenues surpassing $500million. According to Revolut general manager James Gibson, it’s now onboarding over 20,000 businesses every month and processing around £17billion worth of transactions.

After seven years of growth, Gibson still feels it is “at the start of a journey.” Already live in Europe and the US, there is more ground to cover in those regions, and this year it launched in Singapore too.

We asked him what business banking means to Revolut, some of the interesting products it’s offering, and whether or not that “challenger” label is still appropriate.

The Fintech Magazine: How important is it to have a business-to-business offering as a bank?

James Gibson: “I suppose every business is different, but this is a natural extension of the personal banking option. Soon after launching the personal product, Nik and Vlad [co-founders Nikolay Storonsky and Vlad Yatsenko] and co. realised that a lot of their new happy customers had businesses as well, and faced similar problems, such as high foreign exchange fees and difficulty with international payments.

“Since then, Revolut Business has evolved to solve these, and more complex problems for businesses that maybe don’t have an equivalent on the personal side, but the core of the product – the app, the rates, the ease of use – is relatively similar.

“We’re a couple of years behind the personal product, and businesses have different needs to individuals, so there’s a lot for us to build. But it’s a key part of our overall strategy, not least for how both sides of the brand link to each other. A lot of our customers on the business side learned about it from being retail customers.”

The Fintech Magazine What are some of the key benefits of your business offering?

James Gibson: “With Revolut Pay, you can have a retail customer in Singapore, buying from a merchant in the UK, and at checkout you can confirm payment on your phone, just by using your Revolut account, and merchants on the business side get paid directly by the customer. This is where there’s the crossover between retail and business.

“The aim is to change how people interact with their money, and we want to do this for people around the world”

“We also have a product called Revtags, which is using tags to pay anyone. So now we have this global network of 45 million-plus people, as well as all of our businesses, who can send money together, without going through
complicated financial schemes.

“Recently announced Revolut BillPay is a little bit different, and there’s less crossover with retail there. If you have a business account and get sent invoices, through Revolut BillPay you can ingest them into your system without having to manually enter them, and it will schedule the payments for you rather than manually plugging them in. So it’s really a time-saving play for businesses.”

The Fintech Magazine: Why did you want to expand into Singapore?

James Gibson: “We launched there a couple of months ago and are seeing great traction. Singapore is a tech-enabled, forward-thinking country and there are many, many businesses located there. It’s a hub within APAC for global businesses and a lot of them have some form of international operations, which obviously suits our product very well.

“We’re also seeing success on the personal banking side, which typically leads to growth on the business side too, something we’ve seen in other top markets, like Ireland. On top of that, we have a good working relationship with the Monetary Authority of Singapore (MAS), the regulator.”

The Fintech Magazine: What opportunities are there for businesses in the APAC/SEA region?

James Gibson: “It’s obviously a huge growth area in general, and for a company like ours, given the number of markets, and the amount of foreign exchange there is across the region, it’s a huge opportunity.

“Also, a lot of these countries are jumping straight into tech-enabled banking and skipping out this sort of middle ground, hybrid model we’ve had in the UK, which is obviously great for us.

“A number of these countries have quite forward-thinking regulatory regimes designed to help tech solutions flow. So lots of opportunities and lots of growing countries. You’ll see more of us in the coming years.”

The Fintech Magazine: Has Revolut surpassed the challenger label?

James Gibson: “It’s a good question that I’ve not been asked before! I think the change we’ve seen in the last five to 10 years has been quite significant, and we’re very proud to have played a part in that.

“For me, a challenger is someone who challenges norms and fundamentally improves customer experience. And this doesn’t stop when you reach a specific size. If you think about a company like Amazon, for example, it’s obviously one of the biggest companies in the world but I believe it is still a challenger to established norms and ways of doing things, despite the fact that it’s absolutely enormous.

“So I think it’s more of a mentality, and we still strongly have that. We see many areas for improvement in our products, but also new products that we can bring to market. So no, I would still give us the challenger label.”

The Fintech Magazine What’s it like working for Revolut and what’s the “special sauce” that the company brings?

James Gibson: “I have a few more grey hairs than I did when I started working at Revolut seven years ago! But joking aside, it’s a great place to be. The thing I love most is the quality of people. We are lucky to have a very hard-working, passionate and diverse group of people who are truly committed to building something really exciting and solving our customers’ problems.

“The other is the level of ambition that the company has, we’re not just trying to create a new business or personal current account. That’s not the aim. The aim is to change how people interact with their money, and we want to do this for people around the world.

“And that level of ambition is very, very motivating. It probably sets us apart from a lot of other companies.”

This article was published in The Paytech Magazine Issue 15, Page 22-21

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The financial industry is undergoing a significant transformation with the adoption of ISO 20022, a new global standard for exchanging electronic messages between financial institutions. It will replace older messaging formats like SWIFT MT, offering a more flexible, efficient, and data-rich way to process transactions and communicate across the financial landscape.

But what exactly is ISO 20022, and why does it matter? The new global standard promises to unlock a new era for banking, and for those institutions not already convinced or concerned about the changes, it may be time to get on board.

We spoke to Greg Murray, managing director of treasury services product management at Santander US, who shared his insights on the new standard and its potential impact. There is some concern about how smaller businesses will cope with the shift and to help with this Murray says the transition needs to be a collaborative one.

Speaking to our editor-in-chief Ali Paterson, he explains why it’s an exciting time for the industry.

The Fintech Magazine How are you at Santander and the rest of the industry responding to the new format?

Greg Murray “ISO 20022 has been in a state of evolution since it was proposed but the more intense focus on it has been in the last five years or so. A lot of that is driven by the adoption that global clearing systems want to see.

“You’ve got a lot of clearing systems in Europe, some of which are already ISO compliant. And in the US, we have the Fed’s system that plans to be compliant in March of 2025. We also have The Clearing House system, or CHIPS, here in the US that adopted the ISO format in April of 2024.

“In preparation, banks have had this as a major focus for at least three years in terms of investments, making sure we have the right funding and subject matter expertise to meet the deadlines.”

The Fintech Magazine What will be the impact of this change on your customers and partners?

Greg Murray “Fintechs and other vendors are going to need to adapt to the format to support the payment flow process. And for all our clients, whether that’s individuals, small businesses, or large corporations, I think it will be a bit of a mixed bag.

“Some of our clients are already ISO native. They’re using file-based systems that have been provided by ERP providers that are already in the ISO format. Your largest corporations are probably there whereas, for smaller companies, it’s more mixed. Some of our clients were not aware of ISO, even to this point.

“For individuals who typically use mobile devices or online web tools to initiate payments, we’ll see additional fields and or reformatted fields that they will simply have to adapt to. But it’s relatively straightforward for them.

“The reason why it’s a bit more of a challenge for businesses is that most of the time these companies are generating their payments from an upstream system.

“It’s not as if they’re just typing it in fresh where you just fill out the fields as they come along. Typically, you’re loading up a file of some sort from your ERP system and that ERP system also has to be updated. It’s important for the bank to be able to handle this, and ERP vendors will need to be ISO compliant too.”

The Fintech Magazine Will having these standards and regulations to adhere to, push people to constantly up their game?

Greg Murray “I’ve been on several forums related to ISO, and that’s a very good question. I think at the bottom line, ISO keeps us on our toes. As much as there’s a lot of work to do, it is also an indication that we are evolving to improve the way we serve our clients.

“ISO keeps us on our toes… it’s an indication that we are evolving to improve the way we serve our clients”

“When Swift came on the scene in the mid-70s and introduced the concept of structure, we had a fair amount of work to transition from Telex to this modern way. Over time, Swift has become the dominant way in which banks communicate. We all depend on each other.

“It’s companies like Swift and the structure that they introduced that enables banks to be able to communicate effectively. That progression helps us get excited about this, even though it is a lot of work. We know it’s ultimately going to improve things.”

The Fintech Magazine What are some of the challenges that banks face around cross-border payments and domestic transactions currently?

Greg Murray “Probably the biggest challenge is fraud. And most of that fraud comes from business email compromise, which won’t be solved by ISO 20022. But by introducing structured data, we’ll have more interpretability in the fight against fraud, and the ability to render better decisions.”

“Internationally, payments have a reputation for being slow. And that’s one of the reasons why a lot of fintechs have become very successful in this arena because they’ve created a more straightforward or simple way of doing business.

“But settling and clearing payments is still done through a bank or clearing system that the bank belongs to. So delays can be caused by either confusing information or information that isn’t structured sufficiently to render a well-informed decision.”

The Fintech Magazine Do you agree that when it comes to payments, if you’re operating 99.99 per cent correctly, you’re failing? It needs to be 100 per cent?

Greg Murray “That’s absolutely true. In full disclosure, I remember being somewhat reticent in the early days of ISO. The benefits weren’t entirely clear. But we’ve all come around, through industry forums, working with regulators and clearing systems to understand that it will ultimately result in a better experience for ourselves, and our clients. It’s an investment in the future.”

The Fintech Magazine What is Santander’s role in this?

Greg Murray “I believe we have three roles as a bank. One is implementing the changes themselves and testing to make sure it works. The second would be educating our clients. Answering the questions, ‘What is ISO?’, ‘What does it ultimately mean?’ ‘What benefits will it eventually provide?’, ‘Why should they care?’

“We can’t tell our clients what to do, but we can certainly advise them on what they need to consider so that they have a better perspective. And then the third role is helping them transition. We have been very careful at Santander not to call it a migration because we’re not migrating clients per se. They’re still going to use the same systems that they use today, but there will be a transition to extended data and more structured data.

“Templates [for regular payments] will have to be edited and updated. So, we give them all the tools to help them through that transition.”

The Fintech Magazine You mentioned that you’re working with SWIFT in North America. Are banks talking to each other and sharing best practices?

Greg Murray “We compete with a lot of regional and global banks, but we also collaborate and share within the realm of what’s acceptable. So when it comes to an industry initiative like ISO, we do share lessons learned and we’ve had the benefit of good partnerships with a few other banks in the US. We’ve spoken with the clearing systems themselves to understand how they have gone about it

“One of the most valuable pieces of advice that we’ve received in these discussions has been the necessity for partner bank testing. There’s a genuine vested interest from all parties to make sure that when we communicate, it’s seamless.

“Not just that it works here at Santander, but that the other bank is equally capable and ready to handle the format.”

The Fintech Magazine What will be the ultimate legacy of ISO 20022?

Greg Murray “I think the process of moving money around the world will be much faster and richer, if you will, meaning the information that is exchanged will be more robust. It should probably have been done earlier

“The value will be so evident that we can move money more quickly, and provide more information. I definitely believe it will also spur innovation because we won’t be bound by some of the restrictions we have today in carrying capacity.

This article was published in The Paytech Magazine Issue 15, Page 10-11

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Global trade is changing at a significant pace, with trade in digital services increasingly taking up more of the pie. China has been at the heart of international trade for, well, millennia, and along with Southeast Asia, is following this trend. This year, its capital Beijing will host Sibos, one of the world’s largest financial services conferences.

HSBC hardly need any introduction and has been in the business for more than 155 years, continuing to play a crucial role in the global trade finance ecosystem. We spoke to its head of global trade solutions, Vivek Ramachandran, to hear his overview of the current and future trends that are transforming this sector and why China is an exciting place to gather banks and financial institutions from around the world.

The Fintech Magazine How is trade and international business changing globally and what are some of the challenges that are facing banks like yours?

Vivek Ramachandran “Firstly, trade in services is outpacing trade in goods. Historically, we think of trade as products being shipped around the world on container ships. That’s still important. But almost 30 per cent of global trade today is made up of trade in services. It was 21 per cent a few years ago.

“And this isn’t just streaming on Netflix, it’s also cloud and software solutions. It makes the world a smaller place and opens a new set of challenges for companies to manage their working capital. This is a great opportunity but requires banks to understand new business models and the role we can play in helping with that.”

The Fintech Magazine How are supply chains being reshaped?

Vivek Ramachandran “Through a combination of cost considerations, geopolitics, sustainability issues or resilience factors. Some are getting shorter. Others are getting longer. And as new trading relationships are formed, a new set of challenges arise which bring with it its own risks.

“One huge change is around sustainability. Five to ten years ago, it was on the radar, but it’s now gone from a nice-to-have to a must-have. Companies are realising their sustainability obligations extend beyond their own activities to their supply chains too. That includes managing emissions, transparency around labour, building safety, and more throughout your supply chains.

“Companies are either doing this on their own terms or on those dictated by regulators or other stakeholders.”

The Fintech Magazine It’s not just the items being traded that are digital, right?

Vivek Ramachandran “Yes, almost half of B2B trade is now digital too. It’s not happening through physical channels which requires us to understand new counterparties. Suddenly, you’re trading with counterparties under the cloak of anonymity.

“So there are new ways of onboarding customers and new partnerships are going to change things for financial services and for banks. But broadly speaking, trade digitisation can feel likea step forward, and a few steps back.

“If we were having this conversation a few years ago, we’d be talking about distributed ledger technology and blockchain. What’s clear is the way global trade is going to digitise will be very different. It’s going to happen with some government-led initiatives like the UK Electronic Trade Documentation Act, the model law that the UN passed for electronic transfer of records that’s now been adopted by France and countries like Germany, UAE, and Singapore are also looking at it.

“Regardless, I think we will see a very different world emerge in the next five years with a lot of new business models and new data available.”

The Fintech Magazine So, some of these technologies are not playing as big of a role as we thought they might?

Vivek Ramachandran “We are still experimenting with a lot of new technologies, but we need to stay focussed on the underlying business need and not get too excited by the technology in and of itself because technology will be an enabler to solving business problems.

“So, it’s a fantastic time to be in trade and because as a trade professional, if you’re interested in tech developments, if you’re interested in sustainability, if you’re interested in new business models, we’ve got a little bit of all of that in terms of challenges and opportunities to go after.”

The Fintech Magazine How do you see trade finance developing in APAC and Southeast Asia, in particular?

“A more digital world is good for trade. And anything that’s good for trade is good for banks”

Vivek Ramachandran “Southeast Asia is at the heart of several themes I talked about in relation to global trade. In terms of supply chains, there are a lot more manufacturing activities going into Malaysia, Vietnam and Indonesia.

“Southeast Asia also happens to be at the heart of the e-commerce boom that we’re observing. So, business models are being challenged there, but there are also a lot of new opportunities emerging there. Singapore has been at the centre of trade digitisation.

“For HSBC, this is a very strategic region and we have a lot of our product development and innovation  coming out of the region too.”

The Fintech Magazine With Sibos being hosted in Beijing (and indeed mainland China) for the first time, what are the opportunities for fintech and financial services companies in the country?

Vivek Ramachandran “It’s hugely exciting to have Sibos in Beijing. China has a thriving digital economy with a huge amount of innovation, often different to what you see elsewhere.

“For example, we observe deep-tier financing platforms coming out of China where you have large buyers able to finance suppliers all the way through the supply chain, not just direct suppliers.

“It’s the largest exporter in the world. At least seven of the world’s largest ports are in China, so it continues to remain strategic to many supply chains all over the world. Our overseas direct investment out of China has also been growing. China has been active in investing and a lot of that is private sector-led.

“We have also been making partnerships with local platforms that fund suppliers trading internationally. The other point I’d make is that the manufacturing progress in China is very impressive. When I was last in Shanghai, I visited an EV manufacturer and it is genuinely inspiring to see the tech developments in factories there, whether it’s the EV space or the broader sustainable technology space.”

The Fintech Magazine Why is Sibos worth attending?

Vivek Ramachandran “Sibos is always fantastic because, beyond the huge business and commercial opportunities, we obviously work with other banks. So, it’s a great chance to meet our relationship banks. It’s also an opportunity to share some of the best practices that we’ve been leading in and collaborate on the big issues around sustainability and around digitisation.

“A more digital world is good for trade. And anything that’s good for trade is good for banks that help companies trade. So we’re incentivised to help digitise trade.”

The Fintech Magazine From the vantage point of well over 100 years of experience, what are the main areas of disruption you see taking place in this sector going forward?

Vivek Ramachandran “Beyond the big thematic issues, the single biggest factor will be the emergence of data. Digitisation will help us take out costs and introduce efficiency by gathering data in one place.

“This data will remove market inefficiencies, whether it’s informational asymmetries or other frictions. That for me is the single largest opportunity for the industry and I don’t mean just the financial services sector, but for the broader trading ecosystem.

“Artificial intelligence will form a part of that. It need not be generative; it might be predictive AI. The first step though, is to make sure we’re aware of the business model opportunities that emerge out of that, and how we can sell clients with data-led solutions.

“That, for me, is going to be the single biggest change over the next five to 10 years.”

This article was published in The Paytech Magazine Issue 15, Page 17-18

The post EXCLUSIVE: “Digitising Trade” – Vivek Ramachandran, HSBC in ‘The Paytech Magazine’ appeared first on FF News | Fintech Finance.

“Applying AI and generative AI techniques to a business problem is only five per cent of the job. The other 95 per cent starts after that, building all the systems around it to make it safe.”

That’s Bahadir Yilmaz speaking, chief analytics officer in charge of a team of 400 data scientists, data engineers and product managers at European bank ING. While they are at the coalface, weighing the risks and benefits of implementing AI, including large language models where appropriate, the other 60,000 or so of the bank’s employees are not left in the dark about the technology.

ING is building what Yilmaz has described as “an advanced data science workforce” and part of that involves awareness training that “highlights the opportunities but also the (largely unknown as yet) risks” associated with AI. ING has taken a systematic approach to assessing those dangers.

“We have a 20-step process, which evaluates any AI system for 140 risks,” explains Yilmaz. “And only after we say OK to all of these 140 risks do we go into production.”

That applies to systems built in-house  and – perhaps even more so – to those foundational models that, increasingly, the bank is sourcing from big tech and other vendors. Here, says Yilmaz, it works on the principle of “believe nothing you read on the declaration but test it yourself against banking standards.”

Developing those new methods and measures to really kick the tyres is one of the biggest challenges for the bank right now.

“These types of controls are necessary for organisations, but also for society to make sure that AI applications are safe and secure to use,” says Yilmaz.

From chatbots to reconciliations, lending to trading, it’s creating these protective systems around AI models that takes the most effort. But the bank’s plan is to position analytics and AI as “the most critical enablers in transforming ING’s operations”, so it has to get them right. There is also, of course, a substantial cost associated with such computing power, which makes prioritising domains that present a key business risk – like KYC, detection of financial crime, fraud and sustainability – a prudent focus of time and money when it comes to developing an AI tool for the process.

GenAI is certainly more tricky to evaluate. It’s still in unchartered territory, so applications within the bank have been limited to those where perhaps it can do least damage and deliver the most benefit. So far, this “prudent and responsible approach” has seen ING focus on five key areas: chatbots, personalised marketing, KYC solutions, coding/ software engineering and ING Wholesale Banking (WB) lending.

“We’ve been building chatbots since 2017 and have used several different technologies,” says Yilmaz. “All these solutions were super rudimentary. They weren’t really getting the answers that customers were looking for.

“But with the launch of large language models, and especially with ChatGPT, this changed. People saw how good they could be in getting the answer they were looking for, quickly and accurately.

“The key is finding the most suitable technique and applying it to your problem to generate real value”

“We noticed this at ING, too, and shifted our technology from a more statistical natural language program (NLP)-based approach to a large language model-based approach.”

The bank worked closely with McKinsey over seven weeks to build, test, and launch a bespoke customer facing chatbot using GenAI technology. Before any responses were sent to customers, a series of guardrails was applied (to avoid the chatbot giving advice on mortgages and investment products, for example), built using out-of-the-box tools from McKinsey’s AI and machine learning innovation hub, QuantumBlack Labs.

Something new

The new chatbot launched in September 2023, making it the first-of-its-kind, real-life customer-facing pilot conducted in Europe. ING saw an immediate improvement: the more nuanced and contextual answers that GenAI could provide instantly translating to a 20 per cent uplift in customers not having to wait in queues to speak to an agent. The chatbot is projected to eventually impact 37 million customers when it’s scaled to all of ING’s 10 retail markets.

“Clients want instant answers to their questions and they want instant solutions to their problems. Chatbots are highly capable of doing that,” believes Yilmaz.

That makes it sound easy; it isn’t.

“By getting service from one of the big tech companies and plugging it into your website, you can have a chatbot that is able to be your client services channel in a day,” says Yilmaz. But the job is not complete until you have ensured there are no biases in all the systems around it, so you’re not discriminating against anyone, and that your system is safe and the information is secure.”

While “any problem can be optimised and made better with these techniques,“ he’s not advocating that banks apply them to solve all of their problems.

“You should put them in a priority order and start with the ones that really make sense for you. Key is finding the most suitable technique and applying it to your problem to generate real value,” he says. “Lending is, historically, one of the first areas where banks have started using AI models, including advanced models. We see more institutions using the power of their transactional data and coming up with better lending propositions. They are able to provide loans in a matter of minutes instead of days.”

But his concern is that, as use cases multiply, the industry will lack the skills needed to build these systems and put appropriate guardrails in place and at scale.

“We need more and more people who know how to do it. We cannot just keep building these solutions with small teams of experts. So, that’s the first transition that we have to go through,” says Yilmaz. “The second transition needs to happen in certain parts of our workforce where their job is changing. It’s not about extracting information from documents anymore but verifying information that is extracted by AI.

That’s necessitates a different expertise and that transition also needs to be supported.

“Think about it: you’ve worked in anti-money laundering operations all your life, reviewing customers’ annual reports, then AI tools come along to answer all the questions. But they won’t be perfect. So your job is going to be reviewing whether that information is correct.

“That’s a slightly different skill that requires a different way of thinking. Your concentration has to be on different things. And that is a change that, as a bank, we also have to facilitate.”

This article was published in The Paytech Magazine Issue 15, Page 08-09

The post EXCLUSIVE: “Proceed with Care” – Bahadir Yilmaz, ING Bank in ‘The Paytech Magazine’ appeared first on FF News | Fintech Finance.

AI is the buzzword of the moment, but some remain sceptical about the use cases in financial services. Fintechs and banks alike have been quick to flaunt their own ‘AI’ offering, to embrace the hype and attract funding, regardless of how complex their use of AI is.

One company that can make a claim to being ahead of the curve on this is Bud Financial.

“It’s been one hell of a journey,” says its CEO Ed Maslaveckas, who co-founded the company with George Dunning in 2015. Long before ChatGPT arrived on the scene, it was a “consumer app using what they believed was data science to understand customers and make recommendations to them,” adds Maslaveckas.

However, its offering was limited by the technology available to them.

“Now it’s much more scalable to build,” he says, and it’s well positioned to offer meaningful capability to banks themselves. On offer is increased productivity, the building blocks of a more compelling product, and greater efficiency. Others agree that AI tech could present the future of banking. According to McKinsey, “GenAI could add between $200billion and $340billion in value annually… through increased productivity.”

Whether or not banks are prepared to make that leap, is another matter.

“A lot of these organisations aren’t ready,” says Maslaveckas. “Some of the biggest banks are enabled by a very old structure, where they have hundreds of thousands of people performing manual tasks, such as data analytics, balance sheets, fraud reports, customer service etc.”

With Bud’s new Drive product, Maslaveckas claims it “can perform data analytics tasks on banking data in approximately 15 seconds; data processing that would otherwise take two weeks.

“There’s a huge disruption coming in banking, and it’s actually in how they operate. We’re focused on the people that want to make a change today.”

Disruption eruption

That disruption has been on the way for some time now. Challenger banks and wealth management apps have adopted a digital-only approach, onboarding customers in minutes and providing tailored and helpful services through an app. They’re using cloud technology by default and their market share is now growing.

In Europe and the UK, the likes of Monzo and Revolut now firmly have a seat at the table. The US is increasingly seeing huge success with Chime leading the way. In April 2024, Chime hit $1.5billion in annualised revenue and according to consumer research, it’s estimated roughly 22.3 million US consumers have an account. It’s a real statement that challenging norms in US banking can pay off. In August 2024 Monzo added two million new customers in 12 months, to cross the 10 million mark, the equivalent of one-in-five UK adults.

Rival firm Revolut recently received its UK banking license and gained a $45billion projected valuation, making it Europe’s most valuable startup, surpassing traditional banks NatWest and Lloyds Banking Group in the process. A relatively young founder himself, Maslaveckas represents a growing population of people who have no interest in branch-based banking. He’s frank about the change that is coming and those who will be left in the dust.

“We saw the first banks go into the cloud maybe in 2015 or thereabouts. But a lot of banks in the UK and the US are still on legacy on-prem systems.” The customer’s own aversion to change will ensure that many of these banks will remain established “for the next five, 10 years.”

“GenAI could add between $200billion and $340billion in value annually”

For the time being, it wants “to enable the people that are willing to try something out, the fintechs, but also bigger banks that have side projects where they experiment,” he says. “We want to be provocative in our communication given how big we think the shift is going to be. I think our technology is a little bit ahead of what people are comfortable with. And I think we’ll continue to do that.”

“We need to be a little bit more outspoken about the leadership position that we have because we’ve been working on some of these core technologies since 2018.”

Transforming customer service

Increasingly AI will be used to change customer experience, through transaction enrichment and data analysis, something Bud has been working on for years. Many banks are already using some kind of customer service chatbot but there is plenty of room for improvement and despite some hesitancy, we’re likely to see improvements across the board in the years to come.

“This next wave of personalisation is something we’ve completely lost in banking, which is finding new ways to serve customers,” adds Maslaveckas. Ironically, it’s the things that smaller institutions and building societies have offered, through proximity to the customer, for over 100 years, that could increasingly be delivered by multinational banks using LLMs.

Maslaveckas reminisces about letters to his parents from regional banks in the UK, like Midland Bank, that acknowledged a house move or change in marital status, offering services that may help in that transition. In other words, there is an opportunity for banks to go beyond offering the same products in the same rudimentary fashion they have been for years.

The role that AI plays in this, is manipulating data through transaction enrichment. “We focused on transaction enrichment when we were a consumer app. [it doesn’t have one anymore],” says Maslaveckas. “We wanted to do personalisation, in order to be a financial assistant for the customer, which I think every bank needs to become to maintain the time and attention of then customer going forward.

“The bank primacy is increasingly about engagement. If you can control the customer engagement experience, and be as helpful as possible, you have the right to distribute different products to customers.” The problem however is, he adds, “We didn’t know who the customer was because the raw data was hard to understand and process. So we did this whole enrichment thing, and went down the rabbit hole.”

Data enriched

“A lot of people say they’re doing data enrichment, but no one does it accurately enough to create good insight on the customer,” says Maslaveckas.

Even a relatively high accuracy of 86 per cent on transaction enrichment still represents a huge error rate across hundreds of thousands of transactions. By comparison, Bud’s transaction categorisation is greater than 97 per cent accurate. Getting to the smallest possible percentage error rate on transaction enrichment was the key to unlocking everything else.

“With data like income, outgoings, spend data and CRA data you get a full customer picture,” says Maslaveckas. This is where its Drive product comes in. “We can understand the who, what, where of every transaction. Then we add our insights layer, which helps them understand the customer based on the aggregate of those transactions. Drive sits over the top and finds insights across thecustomer cohort,” he says. “Our new AI products actually identify customer behaviours and patterns, inform the banker and suggest personalised offerings such as tailoring a credit card towards them.”

At the end of the day, “banks want outcomes” and analytics is only as good as the potential revenue it can increase.

The people problem

One concern around all of this is the impact it will have on jobs. It goes back to the numbers of people doing mundane back office tasks. According to a report from The Institute for Public Policy Research (IPPR), “entry-level, part-time and administrative jobs were most exposed to being replaced by AI under a ‘worst-case scenario’ for the rollout of new technologies in the next three to five years.”

Of course, this concerns real people’s livelihoods, but pioneers like Maslaveckas say it’s important to look at the bigger picture.

“The higher cause is banks being really efficient because you want lending to be as low interest as possible and you want banks to be able to offer competitive rates,” he says. “There’s going to be job destruction and job creation, like there always is, right? But I think there’s still a lot of need for humans to have oversight and take initiative. AI can only react to the input. They don’t have the agency to make decisions. So, I think there’s a huge cause for that. But ultimately I think more efficient banks are only a good thing.”

There will be a shift, and it may come sooner than people are prepared for, but new opportunities will also arise. The more optimistic outlook involves the augmentation of a human workforce, which according to the IPPR report would mean no jobs are lost and the size of the economy could be increased by four per cent, or about £92billion, a year. Maslaveckas’ prediction for the future is clear.

“In maybe three to four years, we’re going to see challenger banks or startups deliver a better model and create headlines. Share prices [at the big firms] will be hit and then those building the technology in the bank will be pulled into the boardroom.

This article was published in The Paytech Magazine Issue 15, Page 12-13

The post EXCLUSIVE: “AI in Bloom” – Ed Maslaveckas, Bud in ‘The Paytech Magazine’ appeared first on FF News | Fintech Finance.

The point of sale is changing. Or rather, everything around it is.

How people pay involves an increasingly complex web of systems. The technology needed to ensure a payment goes ahead as quickly and safely as possible is becoming increasingly sought after as a result. The payments orchestration market is estimated to be around $1.2billion and could reach as much as $3.5billion in the next two years. So, why the complexity?

To give us a better understanding of the behavioural trends driving growth in this area, we spoke to payments expert and consultant at HPS, Guillaume Leclerc.

One major payments sector trend he identifies includes the rise of alternative payment methods such as BNPL. eMarketer forecasted total BNPL spending in the US in 2024 will grow 12.3 per cent year-on-year to $80.77billion and The Motley Fool found that amongst BNPL users, 53 per cent use it more often than their credit card. Leclerc says there is now a mandate to offer these platforms without additional cost, however, acknowledges that it clearly requires the integration of new systems and onboarding processes.

With more people doing their banking and shopping online, the e-commerce checkout area is prime real estate. Consumers are increasingly using digital wallets in physical stores too.

“We see Gen Z increasingly using their phone to pay. They do not carry plastic as much anymore,” he says.

Indeed, the latest research indicates there has been a shift. The debit card is still the most popular method of payment at the point of sale, but 2024 research from J.D. Power found that 48 per cent of consumers now use digital wallets, up from 36 per cent in a previous survey. ABN AMRO reported that “young adults (aged 18 to 25) are using their bank cards less and less to make point-of-sale payments. In [2023], this group has increased their use of smartphones and smartwatches for such payments from 61 per cent to 73 per cent.”

The payments sector moves fast. It wasn’t that long ago we were making the transition to contactless payments, whereas now many UK consumers feel confident leaving their physical wallets at home. McKinsey also predicts that more than two-thirds of Americans will have a digital wallet within two years.

“Plastic card issue in the coming years may become optional, reserved for use cases, such as travelling abroad”

A cardless future?

In theory, this is all in service of a more seamless customer experience, but it also means that merchants need technology that can process a more complex payments suite. Banks also need to respond to the potential cardless future that Leclerc hints at. “

When it comes to card issuing in the coming years, plastic may become optional, reserved for use cases such as travelling abroad,” he says. “We observe a ‘digital-first’ approach where banks can issue a card immediately, such that it can be used in e-commerce and be deployed on digital wallets such as Apple Pay and Google Pay.”

That’s not to say the physical card is dead and HPS is straddling this transition. HPS offers, adds Leclerc, “a bundle of two cards. One is virtual and can be used in digital commerce. It’s safe and secure. And the other one is plastic.

“But because you have details on one, the physical [card] itself doesn’t bear the name of the customer, or the number, aiding security. If someone finds the plastic somewhere, you can hardly do anything with it.”

Leclerc points out that orchestration is also being impacted by an increased imperative for financial institutions to “offer value-added services during purchase.” This could be paying a bill, gaining loyalty points or withdrawing cash at the POS terminal.

As Sean Gelles, senior researcher at J.D. Power, says: “To remain relevant, debit card issuers will need to convince consumers their product is indispensable.”

This can be accomplished by “focussing on value-added experiences related to budgeting, security, or rewards, all of which have a strong influence on debit card user satisfaction.” All of this requires integration with third parties, banks, and the merchant and requires customer data being more freely accessible through Open Finance.

With more banks onboarding customers digitally, Leclerc says “very specific orchestration technologies are needed because you have to score your clients, get the customer information, go to KYC and so on, all in real time.”

Microservice technologies and low-code/ no-code tools may increase the ease with which this can be achieved, whether that’s building those services in-house or collaborating with specific providers to add to the existing stack.

It might seem like a big change but according to Leclerc “banks have a business case to move to this new technology.” In other words, can you afford not to orchestrate?

This article was published in The Paytech Magazine Issue 15, Page 35

The post EXCLUSIVE: “A Tangled Web” – Guillaume Leclerc, HPS in ‘The Paytech Magazine’ appeared first on FF News | Fintech Finance.