WP-Digital-Banking-EN-HD

www.octo.com – blog.octo.com
FinTech
is cannibalizing banks!
DIGITAL LECTER
Digital Banking

A Note to Our Readers:
This White Paper is the translation of “Banque Digitale : Les FinTechs cannibalisent la Banque”
released in France in November 2014. You will note that some examples and annotations are from
the French market and have no equivalent in English. We hope you’ll be pleased with the reading
though, and who knows, it may bring you a French exotic touch while you enjoy the tasting!

3
White Paper March 2015
The best job in banking: Chief Cannibal
“Everybody missed the [job] title that will be the most important one in
the future: the Chief Cannibal.
The Chief Cannibal runs the internal Cannibalization Department, a
group with the one pure mission: destroy our business.
The focus of the cannibals is to look at every part of the bank and
see if they could destroy it. Using technology, new structures, new
thinking, new business models, the aim of the cannibals is to knock
down the sacred cows within the bank, leap across the product silo’s
and challenge every nuance of thinking.
Of course, the cannibals are really annoying – who wants to get eaten? –
and they don’t necessarily appear on your doorstep every day but, when
they do, prepare to be destroyed. (…)
That is why banks need an Internal Cannibalisation Unit and, if I could
get that job, I would be happy to be nominated as the Chief Cannibal. In
fact, it would be a pleasure, as I enjoy a bottle of Chianti.” *
Chris Skinner.
Well known for his blog The Finanser, Chris Skinner regularly posts independent commentary
on the world of finance. Skinner is also the author of Digital Banks: Strategies for launching
or becoming a Digital Bank, a book about digital banking in the 21st century.
* http://thefinanser.co.uk/fsclub/2014/09/the-best-job-in-banking-chief-cannibal.html

5
Introduction
Across all industries, the emergence of digital technology is stigmatizing businesses
that don’t adapt to economic and social changes. As Chris Skinner puts it in
his book,1
Digital Bank: Strategies to Launch or Become a Digital Bank, even
though banking is a regulated industry, it will be no exception. Industries such as
culture, the media, and education have already been profoundly affected by this
transformation.
Francisco González – CEO of the Spanish bank BBVA –
estimates that ten years from now, no more than 100 banking
operators worldwide will have been strong enough to survive
the digital tidalwave.2
A few exceptions aside, there is no sense of urgency in the banking sector overall.
Few banks embrace radical adoption of new uses, in particular the technological
potentialities of the Web. To further our understanding and be in a position to take
action, we have decided to share our analysis of the digitization of the banking
sector in this white paper, where we examine the reasons behind and the possible
impacts of this necessary transition. Our aim is to provide an insight to help
relevant players ride the wave. In the last part of our paper we offer some building
blocks for starting a digital bank.
[1] http://thefinanser.co.uk/fsclub/2014/05/digital-bank-revised-is-released-today.html
[2] http://press.bbva.com/latest-contents/press-releases/francisco-gonzalez-says-8220-knowledge-banking-offers-more-
andbetter-solutions-for-our-needs-8221__9882-22-c-107358__.html

9
[3] http://money.cnn.com/2014/07/21/technology/netflix-subscribers/
[4] http://goodereader.com/blog/e-book-news/amazon-is-heavily-invested-into-the-success-of-kindle-unlimited
[5] https://www.uber.com/
[6] http://www.blablacar.com/
[7] https://www.coursera.org/
[8] https://www.airbnb.com/
[9] http://blog.octo.com/les-agences-bancaires-la-fin-dun-modele-v2/
[10] http://www.boursorama.com/banque-en-ligne/credits/
[11] http://www.tobechanged.com/1184-le-trafic-sur-mobile-du-secteur-bancaire-depasse-celui-du-web.html
Digital technology
will not spare banks!
The Digital wave has seriously affected other industries
If one looks at how events have unfolded in other industries, one sees that the digital wave has
forced some radical changes. Music is digitized, people under 30 hardly remember what CDs
are. In the wake of Napster, services such as Spotify, iTunes, Deezer and Qobuz showed the way
to legally acquired digitized music. Photography is digitized
– Kodak would certainly agree. When it comes to TV,
Netflix recently cracked the 50 million-mark for worldwide
subscriptions.3
In the US, Netflix accounts for over 30%
of all Internet bandwidth at prime time. We once thought
books were safe, but they are also being digitized and are
headed the same way as music and video – Amazon’s Kindle
Unlimited offer is an example in point.4
We could provide a
myriad of examples in other industries, e.g. transportation
with the entry of new players such as Uber5
and Blablacar;6
teaching with Coursera;7
or tourism with AirBnB.8
Early signs in the banking sector
Let’s start with visits to bank branches: the global trend is downward,9
and isn’t expected to improve
since even mortgages, long considered the private turf of bank branches, can now be taken out
online (such as Boursorama’s basic packages).10
Most financial instruments can now be subscribed
online. The use of cell phones and the “mobile first” trend are driven by the growing habit of using
everything digital – “anywhere, anytime, and most importantly, whenever I want”. Banks are no
exception: Mobile banking surpasses any other banking solution,11
while the number of daily checks
on mobile devices has increased – per client.
20,000 bank
branches
in Europe
have closed
since 2008.

FINTECH IS CANNIBALIZING BANKS!
10
[12] http://www.finance-watch.org/
[13] http://www.challenges.fr/galeries-photos/finance-et-marche/20120810.CHA9569/15-scandales-financiers-qui-ont-marquela-
crise.html
[14] Bill Gates quote (1994)
[15] http://nicolasguillaume.fr/nouveau-cadre-juridique-du-financement-participatif-crowdfunding-en-france/
[16] http://www.01net.com/editorial/623666/miche-l-sapinprepare-l-encadrement-des-monnaies-virtuelles/?page=2
Anger against banks
The digital pressures being put on banks stem from society’s discontent on the whole, which is
leading to significant upheavals in mentalities. Initiatives such as Finance Watch,12
whose goal is to
build “community service finance”, attest to the fact that even former bankers have come to
see the discrepancies between banking practices and economic and social reality.
Since the 2008 subprime crisis, discontent with banks has done nothing but grow and a succession
of scandals in finance have not helped.13
The confidence crunch is severe and translates in particular
by the fact that society is even considering finance and banking... without banks! “we need banking,
not banks”.14
A further effect is that given the morose economic mood, and given their awareness
that banks are not doing what they should to finance the economy, the government is ever pushing
for more competition.
This decree opens the field to new arrivals, and
they are digital natives: a French example is the
implementation of a regulatory framework on
crowdfunding and governmental research on
regulating cryptocurrencies.16
téra- voire de péta-octets est celui du Big Data.
Exception to the
banking monopoly:
on October 1, 2014,
the decree on
crowdfunding15
entered
into force in France.

11
[17] Les barbares attaquent le financement: https://www.youtube.com/watch?v=25Kj9oCyG00
[18] http://www.inc.com/audacious-companies/issie-lapowsky/square.html
FinTech invades finance
FinTech excels at responding to clients’ true preoccupations
Lulled by routine and little inclined to innovate in a regulated and protected sector, banks have too
long neglected their clients and ignored their wishes. Financial Technology companies, or FinTechs,
have found very fertile ground in this to take over new functionalities wanted by society.
They are empathetic and attuned to the grassroots and they concentrate
on improving the lives of banking and financial service users.
They use innovation to fill in the gaps left by banks, at times going
so far as to reinvent their profession.
Another striking fact is that on their staff they all have “digital natives” who have a natural ability
to think in terms of permanent interconnectedness, no matter where you are or what you want,
and it all happens through a single channel: internet. The use of social media is hardwired into
their system. Lastly, these FinTechs are capable of very rapid up-scaling in terms of client adoption,
managing large volumes of data (both flow and storage), geographic coverage, as well as in terms
of attracting investment.17
They are agile on all these fronts.
All business lines are under attack from FinTechs
All finance and retail banking sectors have experienced or are experiencing the arrival of a new
FinTech player. Here are a few illustrations:
Means of payment: Concerning payment means, Square provides solutions for SMEs and VSEs
which are simple to use and have given many unequipped small businesses access to payment
solutions via mobile phones. User fees are transparent and low. Their success in the USA has been
impressive.18
Another player, the Paypal competitor Stripe, offers payment means for e-commerce,
based on the same business model as Paypal. The difference between the two lies in the fact that
Stripe is very easy both to implement and to use.

12
[19] http://www.journaldunet.com/ebusiness/commerce/john-collison-john-collison-stripe.shtml
[20] http://www.intuit.com/
[21] https://www.ondeck.com/
[22] https://uk.kabbage.com/how-it-works
[23] http://en.wikipedia.org/wiki/Lending_Club
[24] http://en.wikipedia.org/wiki/Kickstarter
[25] Kickstarter: http://www.01net.com/editorial/611612/pres-dun-demi-milliards-de-dollars-mises-sur-kickstarter-en-
2013/#?xtor=EPR-1-[NL-01net-Actus]-20140109
[26] In France: http://financeparticipative.org/barometres/annee-2013/
[27] https://www.personalcapital.com/
[28] https://www.wealthfront.com/
[29] http://finovate.com/2014/01/investing-millennials-help-drive-fivefold-asset-growth-at-wealthfront.html
Stripe provides both a better user experience
(UX) for the end client but also a better user experience
for the developers (DX) of the commercial websites which
must integrate the solution through its API.
Stripe’s solution has rapidly expanded worldwide even though the company is only four years old.19
SME loans: current bank lending practices to small business are ill adapted to today’s economic
context.
This is why players such as Intuit,20
OnDeck21
and Kabbage22
have overhauled their credit practices,
namely by inventing new scoring models.
They leverage all data made available or exposed by SMEs
(mostly through APIs): accounting data, banking transactions,
e-commerce trade, and even comments left by clients on their
site or in the social media. Based on these data, Kabbage
allocates, within the hour, a cash advance ranging from £1000
to £40,000. Following successful deployment in the USA, their
solution is coming to Europe via the UK.
Personal loans: another sector that has been mauled by FinTechs. The personal loan crunch created
the perfect conditions for crowdsourcing platforms. The strong growth of LendingClub23
and
Kickstarter,24
to mention just those in the spotlights, attest to society’s appetite for this form of
financing.25,26
Private banking: even the private sector has been hit on its own turf, namely investment advice and
asset management. The success of offers such as Personal Capital27
and Wealthfront28
is proof that
“moneyed individuals” are willing to entrust their money to non-banking actors. Their common point
is a shared view of the digital world, which encompasses the private wealth management sector.
Successive announcements by Wealthfront29
on the growth of the assets under their management
as well as the large amounts entrusted to them (between $80k and $100k) give an idea of how
interested these newly wealthy digital clients are.
In 2014,
Wealthfront
managed
more than
$1.25 bn in assets.

13
Factoring: a new player has come to France. Finexkap30
has just positioned itself on this very closed
market, traditionally restricted to banking, where methods have basically been left untouched for a
very long time. This is highly promising because this FinTech will offer an innovative scoring model
based on Big Data technologies, which leverage corporate data. Moreover they plan to provide
solutions for securitizing receivables, which they will propose to firms wishing to make very short
investments. To be continued.
Banking overall: the cherry on top is that some, who were not even bankers initially, have created
banks out of thin air, such as Simple,31
Moven,32
and FIDOR Bank.33
They have set new trends in their approach to banking, in keeping with their digital native natures.
Several have gone so far as to enter the long and complex tunnel of acquisitions and obtaining a
banking license, proof if ever there were any of their motivation.
FinTechs are only interested in the prime cuts of banking
These new players can have it easy because they do not necessarily need to burden themselves
with back office management and regulatory constraints; these only apply to firms with banking
licenses. The others can concentrate on the front office, where there is the most value to be gained.
New banks, such as Simple, can also choose to join forces with partners like Bancorp34
in the USA,
who provide them with the precious license and manage their back office. FIDOR Bank in Germany
went the whole hog and applied for a license, which they obtained in 2009 after 18 months of
procedures.
For the moment, FinTechs are only taking limited
market shares from the historic players, i.e. the
traditional banks. However, for front runners such
as Zopa with crowdsourcing in the UK,35
their
progress is off the charts.
If we were to select an image to depict current
events, which will probably continue tomorrow, it
would be that of a butchered cow. The spine and
giblets are the back office (or core banking),36
at
once indispensable and regulatory but with low
margins; and the rest of the animal divided into
cuts representing the “noble” front office, the
most profitable (some would say the juiciest) one.
Looking on would be the FinTechs licking their
chops.
[30] http://www.finexkap.com/
[31] https://www.simple.com/
[32] https://www.moven.com/
[33] https://www.fidor.de/
[34] http://www.thebancorp.com/
[35] http://finovate.com/2014/08/uk-peer-to-peer-lender-zopa-tops-1-billion-mark.html?utm_source=feedblitzutm_
medium=FeedBlitzEmailutm_content=646536utm_campaign=0
[36] CBS (Core Banking System) is software which processes daily banking transactions.
Mid 2014, the oldest
European P2P loan
platform, Zopa, had
transacted more than £600
million in loans (over $1bn)
since its creation in 2005.

16
[37] Il est nécessaire que la France décide de se passer de son système bancaire» (Arnaud Montebourg) (juin 2014)
[38] http://cestpasmonidee.blogspot.fr/2014/06/donnees-ouvertes-dans-les-banques.html
[39] Les Barbares attaquent le financement : http://www.youtube.com/watch?v=25Kj9oCyG00
[40] http://finovate.com/2014/06/finovate-alums-raise-more-than-600-million-for-second-quarter-in-a-row.html?utm_
source=feedblitzutm_medium=FeedBlitzEmailutm_campaign=0utm_content=646536
[41] http://cestpasmonidee.blogspot.fr/2014/06/osper-la-banque-mobile-des-enfants.html
[42] http://fr.slideshare.net/Ficoba/fidor-tec-sslsh
[43] https://www.personalcapital.com/company
[44] https://www.circle.com/board-of-directors
[45] http://www.compte-nickel.fr/tout-comprendre/decouvrez-le-compte-nickel
FinTech + digital natives: the future
of banking innovation is already here!
Governments favor new players
First of all, as mentioned above, legislators in industrialized countries (Europe, France, UK, USA...)
are all pushing in this direction. Their goal is to both increase competition by facilitating the arrival
of new players in the banking market (traditionally kept close) and to stimulate funding for the real
economy.37
The implementation of a regulatory framework on crowdfunding in France, and the UK
initiative on open banking data attest to the constant efforts deployed by administrations to foster
competition in the banking sector. In the UK, legal requirements favoring competition are still in
the early stages; one plan in the works is banking account number portability across banks.38
These
examples concretely illustrate a fundamental trend in industrialized countries.
Startup financing is no longer a problem
Second, never has it been so easy nor so cheap to create and finance a startup.39
It is more than likely
that other players will be inspired to join in the fun. High levels of funding40
are recurrent, both for new
players and for “mature” FinTechs.
The latter continue to regularly invest in innovations or to scale up. The sector is dynamic and the
potential highly attractive to Venture Capitalists. Some are even tabling the idea that starting a bank
is no longer a financially impossible mission. Estimates (giving an order of magnitude) state the figures
at $10 million upfront and $5 million in yearly operating costs, as attested by the last fundraising
round to create the bank Osper in the UK.41
The cost structure must necessarily be low but indeed the mission is not impossible. FIDOR Bank,
created from scratch,42
has a regular staff of only 30 people (for approximately 70,000 clients mid
2014) and recurrent IT costs of only €15 per year per client! In addition, former staff from traditional
banking establishments are also entering the fray, and offer increased legitimacy to FinTech launches
(Personal Capital,43
Circle,44
Compte Nickel).45

17
FinTechs are already dreaming up the next step
FinTechs, including those that have been around the longest, are all characterized by constant
investments to expand their business model. Yodlee for example has just concluded partnership
agreements46
with incubators, giving them access via APIs47
to the account data its platform collects
and centrally aggregates.48
Yodlee’s objective is to leverage banking data to get as close as possible to new FinTechs by
incubating them with expert help from their engineers.
Another example, Square, is building on its successes
to start implementing a new business model: cash
advances to SMEs.49
This FinTech, whose corporate
mission is to help SMEs/VSEs, is exploring new ways of
generating revenue by maximizing the use of their own
banking transaction data. They perform a rating score
based on payment transactions and use it to offer loans
or cash advances to their clients. The client loans are
reimbursed through deductions from future payment
transactions.
“Digital natives” are the rising generation
Lastly, from a purely demographic standpoint, “digital natives” will naturally have increasing
influence in society. To ignore or even neglect them would be sheer folly.
The remainder – and conclusion – of this booklet will present key building blocks for initiating the
launch of a digital bank.
[46] http://cestpasmonidee.blogspot.fr/2014/05/yodlee-la-conquete-des-startups.html
[47] Wikipedia: “In computer programming, an application programming interface (API) is a set of routines, protocols, and tools
for building software applications.”
[48] The Yodlee platform is used by a large number of personal finance management (PFM) platforms.
[49] http://www.bankinnovation.net/2014/07/square-revenue-monetization-finance-ipo/
In 2013, Yodlee
had 45 million users
across 150 financial
institutions, of which
7 were among
the 10 top financial
institutions in the USA

21
[50] http://cardlytics.com/
[51] http://cardlinkin.com/cli/la-solution-cardlinkin/
[52] http://blog.octo.com/retour-dexperience-angularjs-d3-js-au-service-de-la-dataviz/
[53] http://en.wikipedia.org/wiki/Hackathon
[54] http://thefinanser.co.uk/fsclub/2014/03/bbvas-amazing-api-challenge.html
The “must do” list for digital banking
Here are a few key technological elements and
processes to launch a digital bank, which we deem
more than promising, which is to say unavoidable.
Becoming “data driven”
This means putting data at the heart of all considerations because they will be tomorrow’s black
gold. Banks have significant amounts of client data, namely through their transactions. The risk for
them today is indeed to be replaced on their own turf, in the longer term, by FinTechs doing their
job for them. It is FinTechs rather than banks that are currently leveraging banking data, potentially
depriving banks of new sources of revenue. The FinTechs have already understood this and
systematically maximize the use of such data by favoring investments, which bolster their approach.
The initiatives Square, Kabbage, Yodlee, and Intuit, to mention but a few of those already cited, do
this naturally. Among other opportunities the banking sector should take advantage of: stakeholders
such as CardLytics50
in the US or Cardlinkin51
in France offer solutions for banks to create client
loyalty by sharing anonymized financial transactions with partners (here merchants).
Partners have access to a set of selected and highly qualified prospects, thereby improving targeting
in their marketing actions. As for targeted consumers, in return they receive coupons and “special
deals” in exchange for their authorization to access their anonymized banking data (in conformity
with personal data protections laws). Big Data means tera- or even peta-bytes.
Working with Big Data
Being “data driven” implies investing in data services: cloud storage infrastructure, data access
technologies of the type NoSQL and Big Data to manage the large volume and/or heterogeneity of
sources, “dataviz” (data visualization) technologies for restitution.52
Furthermore, it is important to
rapidly adopt a data-crossing approach, if only for experimental purposes.
The wealth of the user experience will stem primarily from the cross between various sources of
income, as attested by the applications imagined during the latest hackathon,53
organized by the
Spanish bank BBVA.54

22
The first prize was awarded to the application Qkly, where the
essential function is to help end-users avoid the crowd when
organizing their daily shopping. The application gives the opening
hours where there are the fewest customers. This contest is proof
that it is possible to imagine non-banking applications with added
value for the end user based on the analysis of a large volume of
payment transactions: 30 million transactions both anonymized
and geolocalized for nearly 200,000 stores.
Designing real-time architecture
Furthermore, to meet the requirements of digital users who want “everything, anywhere, anytime”,
we believe it is important to invest in technologies that allow immediate interaction. Batch
architectures, highly present in banking Information Systems, will entail adjustments or additions.
Integrating social networks
Today social networks are a given for demonstrating commitment to clients (support, advice, open
discussions...) and for creating, in fine, value. The initiative by FIDOR Bank and its use of social
media for positive branding and in its business strategy are a remarkable demonstration of this.
Their original approach has led to client acquisition costs which are among the lowest in the banking
sector:55
a mere €25! (to be compared to the $300 it costs a traditional American bank).
Opening up to Open Innovation
Many of the brightest ideas come from without; this is true both for FinTech companies and for
society in general. In consequence, to innovate and leverage initiatives stemming from other
economic and social stakeholders, it is fundamental to reach out to them through what is known as
the Open Innovation process.
[55] http://cestpasmonidee.blogspot.fr/2012/04/fidor-bank-veut-se-faire-des-amis-sur.html
ING considers
that Big Data
technology is
indispensable
to its survival
against FinTechs.

23
Today this term covers a wide array of possibilities for outsourcing and broadening the scope of
innovation. Various categories of third parties can be involved: research laboratories, experts,
partners, startups, clients... Within a certain perimeter, one can meet the technological requirements
for this outreach by using an “Open API” model. This consists in designing and offering services
that can be accessed by third parties in self-service mode.
Transparency and outreach create a web of partners
interconnected via APIs, this is what Square and Intuit56
in particular have done. Another example of current
implementation is the payment API partnership between
Uber and Paypal.57,58
Closer to us, the CA Store59
and
Axa Banque API60
French initiatives testify to attempts to
open up banking information systems to other partners.
This outreach is complex to implement, especially for
gigantic institutions such as historical banks, which are
usually “equipped” with legacy tools lacking in flexibility.
It was to meet this demand, which has arisen only recently,
that Standard Treasury61
positioned itself with its secure
cloud platform. Lastly, from a more forward looking
perspective, Open Innovation is also a way to prepare for
tomorrow’s trends, especially in the field of the Internet of
Things, but that is another story altogether.
Be forward-looking and monitor vigorously
Another principle we find important: to constantly be on the alert, at all times. To do so,
it is effective to organize in-house monitoring through curation activities and execution of
POCs (Proof of Concept). We could not more earnestly advise you to follow and attend
key conferences in all matters FinTech such as Finovate62
and FinDev.63
To go farther, and
to bolster Open Innovation, participate in or even organize, alone or with others, FinTech
incubation projects (e.g. SandBox64
and the FinTech Startupbootcamp in England)65
as well as
[56] http://techcrunch.com/2013/09/24/intuit-integrates-its-quickbooks-accounting-software-with-squares-point-of-saleproducts-
via-an-api-deal/
[57] http://www.lefigaro.fr/secteur/high-tech/2013/11/19/01007-20131119ARTFIG00202-paypal-simplifie-l-usage-d-uber-leservice-
de-chauffeurs-prives.php
[58] http://venturebeat.com/2013/11/19/uber-is-the-first-company-to-show-how-far-paypals-mobile-sdk-has-come/
[59] https://www.creditagricolestore.fr/
[60] http://cestpasmonidee.blogspot.fr/2012/03/axa-banque-ouvre-les-donnees-aux.html
[61] http://blogs.wsj.com/venturecapital/2014/05/28/standard-treasury-raises-2-7m-to-help-banks-deliver-digital-services/
[62] http://finovate.com/
[63] http://www.prweb.com/releases/2014/05/prweb11867728.htm
[64] http://betaboston.com/innovation-economy/2014/05/27/new-fintech-sandbox-program-will-supply-fuel-for-financial-
startups/
[65] http://www.bankinnovation.net/2014/02/a-new-startup-accelerator-kicks-off-in-london/
The BRE Bank
cannibalized itself: in
2012, this Polish bank
redesigned its banking
website from scratch to
put mobile devices at
the core of interactions.
A new brand appeared,
mBank, which fed off
the BRE Bank until there
was nothing left, not
even the website.

24
competitions of the hackathon type (cf. BBVA).66
It is an excellent way to get in touch with new talent,
whether it be technological or human.
However, one must bear in mind that hackathons are only to get started, an inspiration rather than an
end point.67,68
One must further be careful not to instrumentalize the practice by turning it into a pure
communication stunt. All of these actions are a way to better grasp FinTech firms and the potential
they have to create new ways of banking.
Lastly, draw inspiration from your peers and from trailblazers. By way of illustration, here are a
few examples of banks that have begun their digital mutation, in-house and externally. They have
implemented some of the practices presented above. Let us begin with the pioneers who were
instrumental in building digital banks on the basis of an array of components and partners: Simple,
FIDOR Bank, Moven.
[66] http://thefinanser.co.uk/fsclub/2014/03/bbvas-amazing-api-challenge.html
[67] http://www.usine-digitale.fr/article/organiser-un-hackathon-pour-l-innovation.N239291
[68] Swift, Saving Hackathons, API Days 2012, https://www.youtube.com/watch?v=XXYoI0UBJio
At the end of 2013, the Spanish bank BBVA organized a
hackathon around Big Data APIs exposing over 30 million banking
transactions.
• More than 30 million anonymized banking transactions generated by over
2 million bank cards from more than 200,000 institutions
• 780 developers signed up to participate
• In just 2 months, the APIs were used 6.7 million times
• 144 apps were developed in 19 countries
Source: http://thefinanser.co.uk/fsclub/2014/03/bbvas-amazing-api-challenge.html

25
Draw inspiration from the trailblazers
AxaBanque: Soon, the bank designed around functionalities the community wants
AxaBanque: Opening of banking API
Crédit Mutuel: Big Data
Crédit Agricole: CA Store API
Crédit Agricole: Competitions, incubation (BeMyApp)
Fortuneo: Leveraging banking transactions in the form of coupons: smart deals
FIDOR Bank: Uses social media to advertise the bank and create brand loyalty
FIDOR Bank: Provides a money transfer service in Bitcoins
CommerzBank: The first FinTech incubator in Germany
BBVA: Labs Big Data
BBVA: Scoring 2.0
BBVA: Hackathon challenge API
Caixa: Banking services at the heart of Facebook
ING: Leveraging and maximizing client data use through Big Data technologies
ING: API opening and hackathon
Wells Fargo: Startup incubator
Capital One: Lab creations
Capital One: User Experience
Barclays: FinTech incubation
Commonwealth Bank of Australia: Creating storage space in the cloud
mBank: Innovative mobile bank, Bank Innovation Awards

26
[69] http://www.youtube.com/watch?v=nokBj14p4Mc
[70] http://blog.octo.com/minimum-viable-product/
[71] http://blog.octo.com/retour-aux-basiques-quest-ce-que-lux/
[72] http://en.wikipedia.org/wiki/Design_thinking
Digital banking: first steps
Define your mission and build your vision
Our advice is to begin by defining your mission and your vision – your “why”69
, if you prefer. Ask
yourself what kind of bank you want to be. Concentrate on functionalities, those you wish to put
forward, and prioritize them. This allows you to define what your initial actions should be and which
clients you should target first. This will provide you with your MVP70
(Minimum Viable Product),
which you can then rapidly deploy on the ground in order to make any necessary adjustments to
your implementation before enriching it.
Think Experience with a capital “E”!
In our opinion, the most important is to concentrate on each of the stakeholders to optimize the
most complete experience. Upstream, the Design Thinking72
approach will help you realize where
the true problems lie. By focusing on user experience (UX), you will enrich the financial lives not
only of your clients but also of your collaborators. By reaffirming your bank’s culture and global
experience, you will be making an inestimable investment.
Define your IT architecture
Armed with your vision and target functionalities, choose which IT architecture(s) you wish to (and
can) build on. Define the type of Core Banking System you want as foundation. Depending on
your target functionalities, identify all in-house technological and business assets you have at your
disposal. For each new function or digital business to be introduced, ask yourself whether you are in
a position to implement it in-house or whether you should join forces with a partner who already has
a strong base, especially one in a position to meet the fluctuating requirements of digital banking.
1
2
3

27
Define a roadmap
Then define a macro-roadmap, but don’t overreach, be humble and above all learn from your
experiences as you progress towards digital banking. Be ready and eager for hands-on learning (Lean
Startup,73
MVP, POC), both in terms of technology and how you leverage it. Constantly doubt yourself
and seek to confront your views with reality on the ground, by observing and measuring74
the impacts
of your approach. Then make any necessary adjustments, learn, and iterate.
Decide what type of business structures you want to invest in
Lastly, of the essence, ask yourself what form you want your investment to take by examining so-
called Open Innovation strategies: do you want to set up a subsidiary or create spin-offs, buy up one
or several FinTech firms, or be a FinTech incubator? The equation is far from simple; there is no one
right answer. Depending on your human resources, the maturity of your technologies and projected
deployment, the maturity and capabilities of the targeted FinTechs, the answers will probably be
many and diverse.
However reality is stark,75
“Only 9% of all companies in ‘disrupted’ industries survive. But 100% of that surviving 9% had
set up a disrupted (new) business as a totally separate division of the parent company – “no
exceptions”. That means a separate location, management, and team – with a significant number
of ‘digital native’ recruits and investment... A separate digital company won’t ensure success...
It is necessary but not sufficient.” Clark Gilbert, professor at Harvard Business School.
You alone can decide what position is best suited for you.
In sum, we insist, be humble because we are not out of the Dark Ages yet. Keep a pioneering spirit
because there are very few complete digital banks; history and groundbreaking are in the making. It’s
up to you to be part of it.
[73] http://blog.octo.com/lean-startup/
[74] http://blog.octo.com/les-patterns-des-grands-du-web-lobsession-de-la-mesure/
[75] http://www.huffingtonpost.co.uk/colin-morrison/harvard-professor-shows-traditional-media-how-to-cope-with-thefuture_
b_3514896.html
4
5

“it’s better to own
the disruption than to
be eaten by it”
Chris Skinner

29
If a banker were to ask us: “what happens if I do nothing?”,
we could simply answer: “don’t you worry, someone else will do it
for you...” but we would also add: “...and probably without asking your
permission.”
Digitization is overtaking all sectors, banking will be no exception...
and it will happen with or without the banks. It is to them to decide
to what extent they want to hop on the wagon, bearing in mind
that the train is picking up speed and may soon be out of reach.
Our advice to banks is to take swift action. FinTechs themselves fear
the arrival of new players because, despite their disruptive nature, they
are perfectly aware that change can be swift... they have experienced it
from the inside, in their flesh as some would put it. Leaving them with
a near permanent sense of urgency.
Conclusion

30
Stephen Périn
Stephen is a manager and consultant within the OCTO Digital Transformation
Department. He has been with OCTO since 2009 where he accompanies his clients
through their digital transformation. In addition, he directed the in-house collective
volume “Les Géants du Web” (Giants of the Web) which explores 21 cultural,
architectural and technical patterns. Stephen will soon have 15 years’ experience
and in the past has held positions as RD project manager, ESG/SRI analyst, startup
CTO and business creator, in an array of sectors, including finance and non-financial
business. He is a regular speaker in France and abroad at conferences and workshops,
for businesses, the general public and academics.
The rest of the time you will probably find him comfortably tucking into an Osso Buco
or a Tournedos Rossini.
sperin@octo.com
+33 (0)6 69 76 83 37
@sperin
Sylvain Fagnent
Sylvain has been a senior consultant at OCTO for 15 years. His background is in the
applied and functional architecture of banking Information Systems in a variety of
sectors such as retail, investment and private banking. Since 2007 he has been in
charge of OCTO’s in-house training in the banking sector, and has been managing
the sector RD since 2012. From 2010, Sylvain has been a regular contributor to
columns on innovation in retail and private banking. In 2014 he joined the OCTO
Digital Transformation Department where, among other duties, he is in charge of
monitoring the banking sector.
For lunch, he will be satisfying his inner carnivore with a rare sirloin steak.
sfagnent@octo.com
+33 (0)6 03 10 44 11
About us
Authors

31
“We believe that information technology
is a powerful engine for change.
We are fully aware that major breakthroughs
are the result of sharing knowledge
and the pleasure of working with others.
We are constantly in quest of improvements.
THERE IS A BETTER WAY!” OCTO Technology Manifest
Since 1998 we have been helping our clients transform their businesses by focusing
on three main areas: technology, methodology and understanding their business
challenges.
With OCTO they find partner teams who are passionate about maximizing technology
and leveraging creativity to rapidly turn their ideas into value: Attijari, AXA, B2Winc,
BNP Paribas, Bouygues Telecom, Canalplus, Cdiscount, Cloudwatt, Corsair, Crédit
Agricole, Gefco, Macif, FranceTV Numérique, ING, La Poste, Meetic, Orange, RFF,
SFR, Société Générale Direct, Texa, Viadeo, Voyages-SNCF, BforBank, etc.
OCTO is an international group with three subsidiaries: Morocco, Switzerland and
Brazil. We were awarded first prize in the Great Place to Work®
contest for businesses
with fewer than 500 employees for the three consecutive years between 2011 and
2013.
OCTO Technology

PARIS - RABAT - LAUSANNE - SAO PAULO

WP-Digital-Banking-EN-HD

Recommandé

Recommandé

Contenu connexe

Tendances

Tendances (20)

Similaire à WP-Digital-Banking-EN-HD

Similaire à WP-Digital-Banking-EN-HD (20)

WP-Digital-Banking-EN-HD