20/20 hindsight will help payments businesses fast-track digital success

Tuesday 30 June 2020 07:45 CET | Editor: Oana Ifrim | Interview

The Paypers interviews Anders la Cour, Chief Executive Officer and co-founder of Banking Circle which recently published the first in a series of white papers looking at the impact of COVID-19 as part of a bigger picture of change for the payments industry

Your latest white paper focuses on how payments businesses are re-evaluating the role of digital post-COVID, but weren’t they already moving to digital?

Just like in almost every other industry, payments businesses have been planning and implementing increased digitalisation for some years. However, the coronavirus crisis and resulting nationwide restrictions and lockdown in so many countries have undoubtedly accelerated the rate at which new tech and processes have been launched.

This research into the changing trends in the development, delivery, and support of banking services for businesses was planned long before COVID-19 had a name, let alone demonstrated its far-reaching impact around the world. Of course, once the potential impact became clearer, we adapted the research to focus on the influence COVID-19 is having and will have on the delivery of financial services. In doing so, we gained a unique snapshot of business planning and confidence at this critical and historic time in the life of so many providers.

Whilst we do still face a rapidly changing landscape, one thing became clear very early on the various government-enforced lockdowns around the world: the importance of digital provision. Whether it was remote working capabilities, video chats to keep in touch with family, virtual pub quizzes, online grocery shopping, remote learning resources for everything from home schooling to breadmaking, or access to online banking, faster digital payments and essential lending, demand for digital skyrocketed when citizens were forced to stay home. Times of crisis, and sudden peaks in demand, clearly highlight gaps or failings, forcing rapid innovation and driving markets forward more quickly than ever imagined.

Through the trials of the current global crisis, the value of digital has taken on new and immediate significance. This white paper, ‘Ready for the re-build? Re-thinking the value of digital infrastructure’ is one of a series of papers we are publishing based on research carried out amongst banks, payments businesses, fintechs and other financial institutions, which has examined the pandemic as part of a much bigger picture, exploring how financial services businesses are re-thinking digital as a foundational technology to help them thrive in a digital world.

How does it seem COVID-19 is affecting businesses in our sector?

When asked directly about the impact COVID-19 has had on business planning, our respondents were optimistic. The most common response, at 41%, was that the crisis has had ‘a little’ impact, and recovery is expected to be swift. Around a third (32%) said that the virus will affect their business ‘quite a lot’, with changes being made to their business and cost reduction where possible. A quarter (26%) said the impact would be ‘significant and wide-ranging’. 

None of the participants felt the impact could be classed as ‘not very much’ or that their existing continual review of business continuity practices was adequate protection in the face of a global pandemic. 

The response to COVID-19 and post-pandemic recovery is not entirely in the hands of the financial service providers. But who will emerge stronger is very much a matter of opinion. 

One of our interviewees, Santander’s Head of Financial Industry Transformation, Juan Jiménez Zaballos, pointed out that ‘Banks are better prepared this time. Regulators are being more favourable to financial aid being put together to avoid a slow recovery, and these mechanisms that are in place should help that.’

Georg Ludviksson, CEO of Icelandic digital banking solution provider Meniga, agrees: ‘Banks feel well positioned to deal with the crisis, they are well capitalised and have strong balance sheets. They feel ready for recession and can weather it better. They learned from the last crisis.’

But Alex Mifsud, Founder and Chief Strategy Officer of payments optimisation fintech, Ixaris, doesn’t see it like that: ‘The power of banks and governments has increased, but they’re not necessarily ready for this change. We don’t get the sense that banks are well tuned to the digital economy. Digital is about fast growth. Profitability is secondary. By design fintechs are tuned to that.’

Has there been a change in the challenges businesses face?

Respondents to the industry survey and the individuals interviewed were asked to comment on the biggest challenges they currently face. The results were surprising. 

Bear in mind that we carried out the survey and interviews in March and April 2020, when the virus was at its peak in many regions. But still, when ranking their three biggest challenges, less than a third (28%) included economic recession, an expected outcome of the lockdown and ongoing restrictions due to COVID-19. Indeed, it came sixth in the list of top challenges.

The challenges more urgently focusing the minds of the best in financial services are more aligned to a business as usual world. More than twice as many (58%) senior executives in financial institutions operating in key European markets said the impact of regulation was one of their top three challenges. Over half (53%) also considered the implications of constantly evolving expectations of customers as a top-three challenge. Regulation and changeable customer expectations are not new challenges, so it is not unreasonable to think that these two issues would have topped any similar poll in the past ten years or more. 

Does this mean COVID-19 isn’t having as much of an impact on business planning as it might appear?

Although the experts we spoke to have shown that this crisis doesn’t replace the usual, ongoing challenges they face as a business, it has had a permanent effect. Post-COVID, financial institutions will not operate in the same way they did previously. Interviewees confirmed that their digitalisation plans had been undeniably fast-tracked due to the crisis.

Interviewee Dean Wallace, Payment Service Provider ACI’s Practice Head for Real-time and Digital Payments, said: ‘There has been a move to digital channels over traditional call centres, for example, that was already underway for most customers. The pandemic has accelerated that, making it less gradual.’

Santander’s Zaballos added that digital transactions and app downloads had already increased, pre-COVID, and that video conferencing tools are likely to affect the way some banking services are handled: ‘Digital service was already the new norm. Now it’s imperative. Anything without a digital expression is not going to remain as it is, especially where it relates to large numbers of retail clients.’

The picture is similar at Ixaris, as Mifsud commented: ‘It’s accelerating a trend that has already started, from deep digitisation of payments process, to the entire supply chain.’

What lessons is the sector learning from the pandemic?

Financial institutions of all types – payments businesses, banks, fintechs – must take time to understand the future, using the lessons of the past – including those learned during the pandemic – to determine longer-term thinking around the infrastructure that enables success.

Collaboration is a key aspect of a futureproof business, even when the future is unclear. Payments businesses should ensure that business continuity management, business planning, and digital technology design are integrated. They should also look for other organisations as potential partnership opportunities, whether current competitors, partners, customers, or suppliers. The distinction between these categories is blurring all the time and it is increasingly clear that businesses are all in this together. 

The message that a customer-centric business model is essential in the era of Open Banking has taken certainly hold, but our research shows that commitment is a little sketchy when it comes to putting new processes into place – especially when other issues are front of mind. 

How can payments businesses futureproof for a changeable and unpredictable market?

In times of significant change, businesses must not forget to take internal culture, communications, and talent as seriously as technological and operational change. 

Digitalisation is a journey not a destination or a task to tick off the to-do list: the market, regulation and tech continues to evolve. Even keeping up to speed, let alone getting ahead of the game, involves continual development and will affect every area of the business, so it is vital that everyone is onboard. It is, therefore, extremely important for banks, payments businesses and fintechs to understand the role of financial infrastructure alongside new applications, services and solutions, working together to optimise delivery of the right propositions to meet customer need.

Although 2020 hasn’t delivered the clear view we had hoped for, it has provided excellent learning opportunities and 20/20 hindsight will be invaluable to futureproof businesses. This will help financial institutions of all types to regain clarity and confidence and see 2020 as a time that really did lay the foundations for a bold new future.

You can register here for your copy of the white paper, due for release on July 2, 2020.

About Anders la Cour

Co-Founder and Chief Executive Officer of Banking Circle, Anders la Cour used his experience in legal M&A and venture capital, and strong commercial acumen, to co-found Banking Circle in 2013. In 2018 he orchestrated a USD 300 million management buy-out with EQT and secured a Banking Licence in 2020. Anders is the inaugural Chair of the Emerging Payments Association EU, having been on the EPA Advisory board since 2016. He is regularly invited to speak and present at industry events around the world, has won multiple awards and had thought leadership articles published in a range of industry publications.


About Banking Circle

Next-generation provider of mission-critical banking infrastructure, Banking Circle is leading the rise of a super-correspondent banking network. Banking Circle is a fully licensed bank able to deliver compliant and secure financial infrastructure at low cost. Clients, including banks and payments businesses, can now access real-time payments regardless of borders and regardless of size, allowing them to seize market opportunities without having to commit to significant investment in their own internal infrastructure.

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Keywords: Anders la Cour, Banking Circle, payments , COVID-19, banks, fintech, digitalisation, white paper, financial institutions, interview
Categories: Banking & Fintech
Countries: World
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Banking & Fintech