Finastra: digital transformation for an open banking future
Smita Gupta has long been fascinated with how digital transformation enables people’s lives for the better.
This is especially clear today in the finance sector with advancements like artificial intelligence (AI) and the cloud, and the much-anticipated shift to open banking. Gupta has been in technology for 18 years, with a particular focus on fintech, which she finds to be “a very interesting way to combine my economics background, where you analyse the behaviour of people and how it impacts business decisions, with software”.
“What excited me was the opportunity to get into an industry that is really accelerating and looking at how we can transform the entire value chain of banking,” she adds. This is encapsulated in her role as Senior Director, Regional Marketing, APAC, for financial services software provider Finastra. Gupta is responsible for growing the business in the APAC region.
Since its formation through the combination of Misys and D+H in 2017, Finastra has grown to a company reporting US$1.9bn annual revenue, and employs over 10,000 people to serve 9,000 customers. Currently, 90 of the world’s top 100 banks use Finastra’s software solutions which span retail, corporate banking, trade finance and more. Each day, around 10% of trade finance runs on Finastra software and it enables 175m+ retail accounts. “With the Fourth Industrial Revolution, we have evolved from a software company to a solutions company, and now we are moving towards our platform vision,” says Gupta.
Now, the business is positioned to not only play a key role in the digital transformation of the finance sector, but also the open banking landscape and the move towards collaboration as a means of sparking innovation. “Finastra truly believes the future of finance is open, and we can bring various people together in the ecosystem to collaborate together using our platform, FusionFabric.cloud,” Gupta explains. FusionFabric.cloud is Finastra’s Platform-as-a-Service solution which enables financial services companies to be more innovative by fostering collaboration through an ecosystem of partners. “With the platform approach, we are looking to connect fintechs, developers and more to our 9,000+ customers with our platform. No one is doing that in the market across the broad sectors we cover. We have a bold ambition to be the number one open platform for innovation in the world of financial services,” she adds.
The kind of collaboration Finastra enables will be vital in an open banking environment. “We clearly see in the future an ecosystem where we are enabling financial institutions to serve their customers in a more open and collaborative way using open APIs,” comments Gupta. “We are also seeing that the adoption of third-party software is growing rapidly. This is where Finastra steps in to help banks unlock their potential and navigate through the challenges of regulation, digitalisation, and the open banking frameworks that have been put in place across various markets globally.”
The landscape of open banking, which will involve collaboration and data sharing between fintechs, banks, software and third-party providers, is vast and somewhat concerning for businesses and consumers alike, and in order to gauge this new territory, Finastra launched the Open Banking Readiness Index in APAC. The survey measured banks against their adoption of APIs, third-party ecosystems, state of data-based transformation, data monetisation and state of innovation. While 70% of banks agree open banking will increase their customer reach, only 23% have invested in an API management platform, and just 25% of APAC banks are in the ‘advanced’ stages of a data-based transformation. The remaining majority will need to step up to compete against the fintechs in this new ecosystem, but many exhibit concerns about customer data privacy (71%) and compliance (53%).
These concerns are not unfounded, as the data sharing involved in open banking is unfamiliar territory for the finance sector and as such poses cultural and technological challenges. “Traditionally, banks have not been very open to sharing this data,” says Gupta. Concerns over security are not just a key factor for the banks sharing data, but for customers who must be able to trust this is done safely. “It is extremely important for banks to establish a very standardised framework on how data is accessed, and what level of data is accessed and consumed in the way fintechs consume it.” Gupta adds that it’s important to work with the right third-party providers so that any data shared remains secure and compliant, for the benefit of business and consumer.
For example, Finastra’s FusionFabric.cloud is underpinned by Microsoft Azure, as is a selection of its global payments and retail banking products. “Microsoft has strong compliance in the industry – they spend millions of dollars making sure the infrastructure is stable and secure,” Gupta outlines. “There are multiple regulatory, as well as privacy and security rules that providers such as Microsoft adhere to. Yes, data security standards are a concern, but this can be addressed when you work with reliable, trustworthy third-party providers.”
Gupta is confident that concerns involved in open banking are slowly being tempered with banks beginning to see fintechs “as a friend, not an enemy”. The Open Banking Readiness Index found that 84% of banks in APAC consider collaboration with external partners extremely critical for succession adopting open banking strategies. “90% of innovation is coming in from the outside,” says Gupta. “Hence, it is becoming critical for innovation to be seen as a joint initiative when it comes to the financial service industry. Banks and fintechs are collaborating in a variety of ways through accelerators and incubators.”
For the future of banking, Gupta outlines four key trends: a focus on the consumer lifecycle; use of AI and machine learning to increase personalisation; digital transformation and continuous innovation; and open banking platforms and data. “According to Accenture, businesses that are successfully applying AI could increase profitability by an average of 38% by 2035,” says Gupta. “This means that from a business or end-customer perspective, the more banks look at applying AI and machine learning for deeper analytics, it creates an exponentially faster and more personalised customer experience, by getting them better insights.”
To this end, more and more banks are deploying chatbots for elements like retail banking and investment advisory and Finastra aims to be at the forefront of this AI revolution. “We are deeply engaged in advancing the use of AI in financial services,” Gupta emphasises. “Our Detect solution uses AI to catch ‘fat finger’ trades before they are processed in the capital markets space. From the retail banking and payments perspective, as AI gathers more pace in terms of augmenting the human workforce in the industry, you will see customers receive 24/7 assistance; there’s going to be instant gratification and convenience in a faster, more intuitive way.” Keeping the customer experience at the forefront, Finastra regularly organises customer advisory boards and Chief Product and Technology Officer Eli Rosner often meets with clients to gain an understanding of their experience, as well as attending forums such as Money20/20. “When we say 90% of innovation will come from the outside, we truly believe that and this is why we are out there talking to customers and the industry and building ecosystems.”
As far as the adoption of new technologies in banking, APAC is certainly the place to be and Finastra will not stop growing in that region any time soon. “We will continue to invest in APAC, to support the digital transformation of financial institutions that’s happening here, and to ride the wave of open banking in the region,” says Gupta. “In many respects, businesses in Asia, notably in the financial service area, are now leading the world in terms of invention or even adoption of new business models in order to meet the changing needs of the customer.”
This feature first appeared in the February issue of FinTech Magazine.