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The retail industry has raised the bar in terms of the consumer experience. The financial services sector has taken notice and is upping its game; no simple task considering the myriad regulations the industry is subject to and the breadth of services players provide.
Adoption of open platforms and leaving fintechs to handle the innovation and technology side of things is seen as a solution.
BNamericas spoke to Troy Fields of global financial technology solutions provider FIS about this and other topics.
Florida-headquartered FIS leads the 2017 IDC FinTech Rankings, which categorize and evaluate the top global providers of financial technology based on calendar year revenues from financial institutions for hardware, software and/or services.
BNamericas: In which product areas are you seeing strongest demand and why do you think that is?
Fields: There are many factors that drive demand across financial services such as the rapid advancement of technology, regulatory changes, the rise of cybercrime and changing demographics. However, changing consumer expectations are the primary force for change in banks in the region. Driven by their experience in the retail environment, where consumers have seen a step change in speed, convenience, innovation and recognition for their loyalty, they are starting to expect the same from their banking providers. For banks, this translates into the digitization of client interactions that are contextually relevant, delivered across a broad and ever-expanding range of digital channels to produce an enhanced user experience. Consumers expect their banks to understand the entire customer relationship and are looking for them to bring innovative products to market quickly and securely in a real-time environment, 24/7.
BNamericas: There seems to be a lot of talk about banks, such as BBVA, adopting more open platforms. What are the benefits of these types of platforms and what are the challenges?
Fields: Consumers are beginning to demand the freedom to interact with their banks in the way they are most comfortable, not constrained by the traditional ways banks prefer to do business. But, banks are often unable to keep up with the very latest technology or the most popular consumer app. By opening their platforms in a secure way, banks can focus on the business of banking, letting more agile players develop the new innovative apps that best meet individual consumer needs. We are seeing this in Europe with PDS2 [Payment Services Directive 2, scheduled to be implemented in January].
The challenge with this model for banks, of course, is that they risk losing touch with their customer. Successful banks have opened their platforms, but have included these external applications under their own brand of services, positioning themselves as the consumer's relationship manager, and offering one place for all their financial and related services. So, instead of going to the bank for a mortgage, the bank provides a house buying experience, providing links to the real estate agent, the appraiser, the inspector, the title company, etc., putting the bank at the center of the total experience, even though they may not own all the ancillary services.
BNamericas: You are involved in Atom Bank in the UK. What is your role and do you see similar opportunities arising in Latin America?
Fields: FIS provides the processing platform that brought Atom Bank to the market last year. This model is beginning to be seen around the world and in many LatAm markets. Banks can either be born digital, they can create a parallel digital operation or totally transform into a digital bank. In either case the transformation requires the ability to maximize the digital channels to provide an enhanced client experience that goes beyond the mobile app. This is done using omnichannel capabilities, a 360-degree view of the customer that allows for enhanced product offerings that are relevant to the individual client and priced in a way that recognizes the overall client relationship. To do this, the bank needs a strong, agile core application that allows for the handling of the transactional, regulatory and back-office needs whilst enabling a fast route to market for new products and enhancements. FIS, as the world's largest financial services technology company, is the only provider that has the complete solution set to manage all these elements, as well as the track record to implement it successfully.
BNamericas: On a similar theme, can you talk a little about your strategic plans for Latin America and the Caribbean? For example, are you targeting any markets in particular?
Fields: FIS' core strategy is to be the single source provider for financial technology to the financial services industry. Acquisitions such as the purchase of SunGard in 2015 form part of implementing that strategy as FIS gained access to market leading solutions in the wholesale banking sector to complement our portfolio. Our broad footprint in the region with over 200 client relationships gives us the reach to offer our services across multiple markets in the region. For instance, FIS is the largest card-processing company in the region, processing over 90mn credit and prepaid cards out of our center in Brazil. We plan to build on that strong foundation to offer our services to other markets, leveraging our global expertise to deliver world-class solutions.
We are truly a global provider which gives us the capacity to serve markets that are being impacted by market challenges where our solutions provide the right answers. For example, Mexico and Brazil lead in fintech growth and banking transformation. Basel III and IFRS 9 are major compliance challenges for banks in several markets like Colombia and Chile among others. Our aim is to be the de facto provider for banks looking for help in solving these problems.
FIS was again ranked No. 1 in this year's IDC FinTech Rankings with over 20,000 clients in over 130 countries. We want to bring our knowledge and experience to solve the local challenges faced by the region. To this end, FIS is actively engaged, along with other partners, in the creation of a payments innovation center in LatAm to address the unique needs of this market.
BNamericas: Financial inclusion is an issue in Latin America. How can technology help "bank the unbanked" and can you give us some examples of cutting edge tech solutions?
Fields: We are all familiar with the statistics regarding unbanked and underbanked populations in the region and how digital technologies are key to bringing financial services to remote areas. But we don't believe this is purely a technology discussion. The unbanked need an incentive to leave the convenience of cash and migrate to a banking product.
A good example is pre-paid payment products for the disbursement of social benefits, health expenses and subsidies, micro loans, etc. Products like these use favorable regulatory conditions to lessen the know-your-customer requirements and can be easily accessed using mobile technologies. But it's not just a matter of availability of technology, providers need to think carefully about how technology can facilitate the end user experience, accelerate enrollment, ensure security, reduce operational costs and provide incentives (loyalty points, reduced commissions, etc.), and all working under a regulatory framework that incentivizes fintechs, banks, merchants, etc., to participate and develop a ubiquitous and consistent experience, with interoperability and portability.
BNamericas: You must talk to banks about digital transformation and the associated challenges. What do they say to you? Do they fear change or are they excited about the opportunities out there? Or is it a combination of the two?
Fields: Not a day goes by that the topic of digital transformation doesn't come up in conversation. It is a top-of-mind item for all banks in the region. On the one hand, they are excited about the possibilities and opportunities this transformation presents. Many believe that making the change is critical to their survival, and they are making massive investments to change their technology and operations.
However, major change like this is a daunting prospect, and banks are naturally concerned about the risks and expense associated with such a transformation program. Banks are used to regulatory changes, which whilst difficult at times, come with a well-defined set of requirements that can be analyzed, evaluated and implemented in a controlled manner. Digital transformation doesn't come with a guide book and set of clear requirements. There are no guarantees on how customers will respond. The business case must try to quantify the impact this major technology change will have on consumer behaviors and the associated uplift in revenue. However, we absolutely believe that for banks, digital transformation is not a question of if, but when. That is where having a trusted partner, with global expertise and experience and a complete solution set is critical.
About Troy W Fields
Fields has worked at FIS for 25 years and devoted the last 18 years to the payments industry in Latin America. As Head of Solutions for Latin America, he is responsible for the identification of market trends and the definition and coordination of strategies and solutions for the Latin American market across all product lines. Originally from Puerto Rico and now based in Florida, Fields has a bachelor's degree in accounting from University of South Florida.