Illimity-Fabrick bolster customer base in fintech space
Through the combination of Illimity, Fabrick, and HYPE, a new age of digital platforms could influence the future of Italian banking.
Illimity and Fabrick, both part of the Sella Group and focused on developing open banking and the Italian fintech ecosystem, have come together in a Joint Venture agreement in the fintech HYPE.
HYPE is a subsidiary of Banca Sella and a popular mobile banking platform in the Italian 'challenger bank' sector. The platform allows the legacy bank to expand its customer base and demonstrate its new bitcoin trading service in an effort to “build on its popularity with a largely millennial [and Gen Z] audience.”
HYPE is growing increasingly popular among young people and, after combining forces with fintech firm, Conio, the Italian challenger bank, which services 1.2 million customers, recently introduced the ability to buy bitcoin within its app. This means that, if you have a debit card with the firm, you will have the opportunity to “buy, sell, spend, and store the world’s largest cryptocurrency by market cap.”
The Joint Venture will be mutually beneficial for all parties, with the combined power of the three firms making the most of the new opportunities in the digital financial services and open banking markets, where a client segment is rapidly emerging. “In Italy alone, there are already over 2.5 million fast-growing clients: these clients are not interested in a bank, but in simple and ‘light’, easy-to-use solutions that respond differently to their financial needs.”
This move will achieve four key things:
- From a strategic perspective, HYPE’s ability to acquire new customers from more youthful generations will unlock a market that Illimity struggles to cater for, but will give HYPE access to Illimity’s customer engagement capability. This means that they will be able to “attract a growing number of customers”, thanks to Illimity’s full suite of services, channelled through commercial partnerships with third-party operators.
- When it comes to technology, “the common evolutionary vision, key components of the shared open banking systems [introduced by Fabrick], [and the] use of the same modern core banking system (Centrico), as well as the similar architectural design of the two platforms illimitybank.com and HYPE in both banking and non-financial products, will ensure that integration is more immediate than is generally the case in these type of deals, without sacrificing market presence.”
- On the sustainability of the business model itself, the venture will create become more economically sustainable and profitable, courtesy of the “synergies related to marketing investments, commercial partnerships with financial and industrial operators, and developments in technology.”
- And, finally, from a managerial perspective, by fusing the combination of experts and specialists, all of whom have honed their crafts for a myriad of years whilst working at both Illimity and HYPE, “a team with an experience that is almost unique on the market”, will be born.
“Overall, this initiative - between the pro-rata profit contribution from HYPE, funding synergies and lower cost of direct banking activities - will immediately generate a positive incremental impact on Illimity net result, estimated to be around €10m in 2023 and around €20m in 2025.
"Moreover, the deal is estimated to generate a slightly positive impact on Illimitiy’s regulatory capital at the closing date, set to increase thanks to the positive contribution of the initiative to the expected net results in the period 2021-25."
Zafin: Banking is now in the era of the tech ecosystem
The development of tech ecosystems is placing the future of post-COVID banking in jeopardy. At a time when Big Tech can replicate the functions of traditional financial institutions, what can banks do to retain a grip on the market?
John Smith, EVP Ecosystem at Zafin, has a few ideas. A SaaS cloud-native product and pricing platform for financial institutions, Zafin is preparing the next generation of banks to cope with this precise challenge.
Smith is responsible for the strategic and tactical management of the company’s ecosystem, including the creation of new business models to support growth and differentiation. We asked him four questions:
Q. Have the events of the pandemic caused an irreversible shift in the digitalisation of banks? If so, is COVID the sole cause or are there other factors?
It’s a great question and one that I am asked a lot. Without a doubt, the COVID-19 pandemic has driven a significant shift in the acceleration of digital. In fact, I’ve seen some estimates show there to have been as much as four to six years of digital adoption growth since the initial lockdown started.
While the pandemic may be the primary reason for this growth, two other drivers include fintech disruption and the high costs of operating a traditional retail bank. Both of these factors have caught the attention of banking executives as they set their minds on accelerating digital transformation with a focus on high return, low risk.
Q. Some commentators believe banks must learn from Big Tech in order to survive. Do you agree? Please expand.
I agree completely; we’re living in the era of the ‘ecosystem’. All the seismic shifts we’re seeing in technology, be it aggregation, embedded finance, DeFi or hyper-personalisation are all enabled by the foundation of an ecosystem.
When financial institutions work with a strategic partner like Zafin, which has made the strategic investments in a best-in-class ecosystem, they’re able to capitalise on opportunities more quickly and safely, and will be better positioned for growth now and at the other side of the pandemic.
Q. What are currently the obstacles to adopting Open Banking? Is it more likely to 'take off' in some regions rather than others?
I would argue that Open Banking has been in the US for some time and will only continue to grow there. By definition, Open Banking is about the secure sharing of financial information that customers are aware of and have authorised. Under that definition, we’re seeing aspects of this well underway even though its full potential remains to be seen.
Third-Party Providers are a natural outcome of Open Banking, whereby they can create propositions beyond what a bank normally does to enable banking functions such as payments, borrowing, saving and so on. Once again, some of these are already present through industry-led initiatives, whereas regions such as the EU have taken the pathway of regulation such as PSD2.
The industry-led initiatives we’ve seen in the US have also had the added advantage of guard-rails that regulatory bodies like FFIEC and CFPB provide. There are also other technology-led initiatives such as API definitions that are set out through the FS-ISAC.
I would argue the future of Open Banking in North America will be through the natural evolution of the guidelines and API definitions that have been published, as well as the natural progression of industry initiatives.
Q. Are there any other bank tech trends you'd like to discuss?
Coreless banking. Zafin has been pioneering some of the work around externalising functions out of the legacy core to drive a more ‘fintech nimble’ bank, while not having to deliver a ‘heart and lungs’ core bank replacement.
Real life examples of this include moving some of the core functions of a banking system, such as product and pricing to a platform like Zafin. Origination, onboarding, KYC, risk, and compliance are all other examples of externalising banking functions for added agility.