Why a fancy radio won't make your car go faster

Friday, November 10, 2017

BNamericas spoke to the regional head of Swiss software giant TemenosEnrique Ramos O'Reilly, about digital transformation in the banking sector, how banks feel in today's rapidly changing world, and what its plans for the region are.

BNamericas: To transform digitally, it's vital that a traditional bank updates its core system. Why?

Ramos: It's vital that the core system is updated because just transforming communications with the user through the adoption of mobile applications is like changing the radio in an old car and then expecting it to go faster.

The processes of a digital bank must include a transformation of its transactional core which permits the rapid creation of personalized products and permits dynamic marketing and automatic processes – that is to say, a bank where clients, via digital devices, can conduct transactions without having to go to a branch. A digital bank makes good use of customer information in order to anticipate the financial needs of clients and help address these needs. It is also a bank with open technology that allows integration of an ecosystem of products and services of third parties as well as the infrastructure for payments and real-time domestic or international transfers.

BNamericas: What challenges, in terms of security, does having a more open platform present?

Ramos: Openness and security are opposite concepts but a balance must be achieved; the more open a system is, the perception is that it will be more vulnerable to external attacks. The security is obtained through good design of the technological framework of the interfaces or application programming interface (API), as it is known in English. These interfaces are increasingly standardized and comply with protocols that include an integrated security layer. It is a priority for us to ensure that our APIs include these security protocols, but at the same time the bank must test the vulnerability of its own architecture.

BNamericas: You must talk to banks in the region about the changes they have to introduce. What do they say to you? Are they scared or excited about the opportunities out there? Or is it a combination of the two?

Ramos: Most banks are "scared" of seeing an increase in competition from new players, competition from new companies, fintechs, that want a piece of the pie, because of the regulatory pressures that are becoming more expensive every day and the technological changes for which they are not prepared. The secret is to see this as a catalyst for change that should guide the bank along the path to modernization. Banks must accept there are new players but that more than competition, they are part of a new "ecosystem" that must be taken advantage of, that there are new ways of doing things, of delivering products and services to customers, of lowering their costs and to highlight their importance not only to safeguard monetary resources but also to help their clients achieve their financial objectives.

BNamericas: Improving banking penetration is a challenge in Latin America. Could having more banks with digital services help increase the levels and why?

Ramos: Of course. Digitalization gives us several advantages in terms of obtaining a higher rate of penetration. On the one hand, there are mobile devices, tablets or telephones, that allow the "branch" to be transported to where the client is located – a remote village, for example – and a multitude of banking transactions to be made on site. On the other hand, ease of use makes the client feel more familiar with the bank and promotes the use of products and services. Processes such as authentication become easier with fingerprint readers or facial recognition, which involves the use of the inbuilt cameras of phones. Finally, digital services reduce costs by making the bank more efficient with simpler and more automatic processes. If you manage to migrate processing to the cloud, the operating costs are further reduced, which allows the granting of loans at lower costs or making viable smaller-sized loans that would benefit a greater number of clients.

BNamericas: In terms of digital transformation, do you think the banking sector in the region is investing enough?

Ramos: Today the investment in technology systems by the financial sector is already very significant. The problem is that investment is still made to "maintain" obsolete systems whose maintenance is increasingly expensive, which leaves very little money in the pot for innovation. We believe investment should be directed into a complete transformation of the systems to adopt a digital strategy of the entire bank – a transformation that can be carried out in an evolutionary way with the appropriate technology to reduce risk.

BNamericas: Could you talk a little about your strategic plans for the region?

Ramos: At Temenos, we had a good launch and initial success in Chile. We already have three significant banks as clients and in three different segments of the sector – a commercial bank for small and medium-sized enterprises, a bank focused on wealth management and a bank/broker for stock market investments. We hope in 2018-19 to open an office there and hire Chilean personnel to enhance further the service we provide our clients.

About Enrique Ramos O'Reilly

A Mexican national, Ramos graduated from the country's Universidad Nacional Autónoma de México with a degree in engineering and started working in the UK in 1987 for FCS-EPS and Thorn EMI Computer Software as a consultant. While there, he also studied for an MBA at Kingston University. He founded companies Potentia and Cavanova in the US and worked as a representative of banking sector CRM solutions provider Finantix. In 1993 he joined Temenos and has been involved in more than 40 banking software deployments, in Asia, Africa, Europe and the Americas. Today he is based in Miami.

About the company

Temenos Group, headquartered in Geneva, is a market leading software provider that partners with banks and other financial institutions to transform their businesses. More than 2,000 firms across the globe, including 41 of the top 50 banks, rely on Temenos to process the daily transactions of more than 500mn banking customers.