Innovation is a choice

There’s nothing like a week in another city to get the innovation juices flowing, and London Fintech Week was exactly that (thank you Luis and team for another week of great debate, networking and insights).

Source: Pexels.com/photo-512249/

There’s nothing like a week in another city to get the innovation juices flowing, and London Fintech Week was exactly that (thank you Luis and team for another week of great debate, networking and insights).

So, what is new in the world of Fintech? Well, if the speakers and panelists are to believed, and the messages were far too similar and consistent for them not to be…

…AI is playing an increasingly important role in the world and indeed in the world of banks – …  . It is clear that to win in the investment banking game will still require smart people – but we must couple smart banker types with AIs and we must change our definition of “banker types” to include engineers and mathematical PHDs.

…Blockchain is here, and it’s all grown up. No longer a concept for alternative funding and the underworld, the cryptocurrency conversation is upping the volume at the highest levels with countries like Canada, the UK and Singapore all running projects, and banks of all sizes experimenting and building applications both in crypto-coins and blockchain technologies. Even the highly volatile crypto-currency prices over the week did nothing to dampen the enthusiasm. With the rise of open source, I expect we will see increasing opportunities to move from our existing centralized models to new blockchain enabled ones in many economies and industries.

…Trust is no longer about relationships, nor the strength of your brand. It’s about ease of use and, increasingly, peer review. Customers are no longer seeking a similar experience to the one they get from other banking brands, they’re looking for an experience like they get from the mega brands like Apple and Amazon. Banks are going to need to up their game – and quickly!

Clients know that if they are not paying, they are the product. Both banks and clients know the power of their data – what will this mean in the future? How will this change their expectations of service? Security now becomes as important as service; will clients demand due diligence of their service providers to ensure that their data is secure?

…Innovation is a choice – it doesn’t just happen. This is potentially the most important message of all. Entities that are leading in the start-up and innovation space are choosing to  – they are seeing the possibilities that innovators bring and are finding creative ways to enable them. The innovation choice is being made at the highest level – countries like India, Canada, the UK, Germany, the Netherlands, and China are all facilitating innovation communities and the start-ups and banks coming out of those countries are moving faster than others because of it. It is a choice because there are millions of reasons and costs involved with creating change, but forward-thinking leaders recognize the importance and their choice to enable, means they are leaping ahead.

…It’s organizational cultures that will make the space for innovation and those cultures look to leaders for the messages they need. Coincidentally, I just finished reading “Under the Hood” by Stan Slap where he describes how to maximise business performance. Culture understands leadership motivators beyond words and culture works exceptionally hard to protect its own existence – so innovation will simply not happen without leaders giving the right messages. Innovation is a choice leaders have to make and their actions will send the clear message.

Everything we know, the way we work and the way we behave was all once created as a leadership or cultural choice. In this exponential era, we will need to change the stories we tell, the way in which we work, the technologies we believe in. It’s ridiculously exciting – and it’s moving…well, exponentially! At last years’ event, there was talk of what blockchain is and what AI could conceivably do, this year it was all about what businesses are being built on these technologies. I can’t wait to see what the next year brings!

by Liesl Bebb-McKay

 

Finding your True North

In RMB’s world, and indeed in corporate and investment banking in South Africa, the Foundery is an unusual paradigm. On the one hand, the Foundery is a fintech, aiming to disrupt the financial services industry with innovative and novel products and services, but on the other hand, the Foundery is very much rooted as the digital innovation unit of RMB — one of the very incumbents which stand to be disrupted by the fintechs.

In RMB’s world, and indeed in corporate and investment banking in South Africa, the Foundery is an unusual paradigm. On the one hand, the Foundery is a fintech, aiming to disrupt the financial services industry with innovative and novel products and services, but on the other hand, the Foundery is very much rooted as the digital innovation unit of RMB — one of the very incumbents which stand to be disrupted by the fintechs.

There are many things that are unique about the Foundery, not least of which is its position at the intersection between fintech startup and banking incumbent, but most pertinently is its mission to completely change and reimagine the corporate and investment bank of the future.

This is a monumental goal and certainly not something that can be achieved without great effort. It may be worth asking, why not go for something smaller or easier? Why not chase the untapped profits or go after the opportune inefficiencies in traditional banking

The Foundery’s mission is what we call its True North. This is what gives the Foundery its identity and guides its actions. Without it, the Foundery would be another player in the fintech space, but with our True North, the Foundery is a fintech with purpose.

https://www.jobmastermagnets.com/fun-facts-about-magnets

Earth’s geographic North Pole

WHAT IS TRUE NORTH?

In astronomy, True North is the direction along the earth’s surface which points towards the geographic North Pole of the earth. This seems reasonable as geographic north is the northernmost point of the earth, so why call it True North when it is already north? Why the extra qualification?

The reason is that compasses and maps point to a slightly different north pole, what we call magnetic north and grid north respectively. These differences arise out of the slightly irregular shape and magnetic distribution of planet Earth.

http://gisgeography.com/magnetic-north-vs-geographic-true-pole/

The difference between the true north and the magnetic north

True North is important in astronomy because it serves as a reference by which we can measure the position of every object in the universe relative to its point of observation on Earth. This takes us back to the analogy of the Foundery’s True North and what we mean by the concept of True North:

Your True North can be thought of as your fundamental purpose that guides everything you do.

Just like the Earth’s True North is used by astronomers to map the night sky, your True North is what informs your goals and your decisions. It is the guiding principles by which you can make your biggest and most impactful choices.

IDENTIFYING YOUR TRUE NORTH

The concept of your own True North is something which is quite abstract and extremely daunting. What does it mean to have a fundamental purpose? Where does it come from? What am I meant to do with it? How do I know if I even have one? These questions are all relevant and aren’t easy to answer. In fact, there are no obvious or immediate answers — it’s up to you to decide what they are.

The good news is that we can learn from the geographic North Pole and extend the analogy. In practice, while we can’t rely on compasses or maps to navigate to the Earth’s True North, astronomers have been using the North Star, also known as Polaris, to mark the location of true north since the time of the Ancient Greeks. The North Star lies almost exactly “above” the geographic North Pole. Furthermore, the North Star is visible throughout the year (as long as you’re in the northern hemisphere*) and is therefore a reliable, although ancient, method of navigating to true north.

http://earthsky.org/astronomy-essentials/north-star-movement

The North Star: a time lapse image shows how the North Star rotates tightly around the celestial North Pole (in line with True North), while other stars rotate with a much wider radius.

Extending this analogy to your own True North, the challenge then becomes to find your North Star. What is that thing, whether it is abstract or tangible, that points to your True North? This could be a person, it could be your family, it could be your talents, it could be your hobbies or whatever it is that affirms that you doing what you love and that gives you a sense of purpose.

In the Foundery’s case, True North is our mission to change the world of banking, and the North Star is the people who have stepped up to the challenge to make this mission possible. Without the North Star, the Foundery would never be able to find its True North. Now the challenge is up to you — go out there and find your own North Star and, ultimately, your True North.

* Unfortunately there is no equivalent star in the southern hemisphere

by Jonathan Sinai

The Doosra

Working in an investment bank over the past decade has provided the opportunity for many interesting conversations around what the value to society of an investment bank represents. Often the model of a “zero sum game” is proposed which suggests that finance often doesn’t add much – in terms of the transactions that banks facilitate, someone is a winner and someone else is the loser, there is no net gain to the world. Other purists would argue something along the lines of efficient allocation of resources. That initially sounded a bit too creative for my more linear reasoning, but after years in the trenches, it has developed an intuitive ring of truth to it.

Working in an investment bank over the past decade has provided the opportunity for many interesting conversations around what the value to society of an investment bank represents. Often the model of a “zero sum game” is proposed which suggests that finance often doesn’t add much – in terms of the transactions that banks facilitate, someone is a winner and someone else is the loser, there is no net gain to the world. Other purists would argue something along the lines of efficient allocation of resources. That initially sounded a bit too creative for my more linear reasoning, but after years in the trenches, it has developed an intuitive ring of truth to it.

Similarly, digital disruption suffers a questionable motive. For some enterprises, such as Uber, it may appear that the shiny plaything of some young geeks on the west coast of america has been allowed to plough through the livelihoods of real people with real jobs and families around the world. When applying such thinking to digital disruption in the realm of investment banking, the question arises as to whether there is any real value that this rather obscure digital offspring of an already often questioned enterprise can produce.

At times this line of thinking led me to check my own passion for this “new vector of commerce”. How do I ensure that my natural fascination with some “new and shiny” geek toy is not diverting what should be a cold, objective application of technology to investment banking, rather than being an excuse to pursue disruption for its own sake. How do we ensure a golden thread of validity and meaning to this exercise.

I started thinking about Google, and how I could justify what value they might have brought to the world (and not just their shareholders). I won’t pretend that I spent much time on this question, but I did come to the following example. Google maps is a fantastic application, and I probably initially loved it more for the fact that in this we have an application that is bringing the real world (travel, maps, my phone, my car) together with the digital world (the internet, GPS technology, cloud based algorithms).

However, it is a tool that many people use, and its value extends beyond that initial fascination. I have considered that in a very real way there are likely to be hundreds of millions of people that might use google maps every day to guide them on an optimal route in their cars. And, true to form, it manages to do this: either by advising detours around potential traffic jams, or by merely showing quicker routes that save time.

That extra time in traffic that has been avoided represents a very real saving in carbon emissions into the atmosphere, and real energy that would have been wasted pumping cylinders up and down in an idling vehicle. This is not a zero sum equation where google benefits and many small companies lose out. This is a very real benefit to the world where increased efficiency reduces the amount of wasted energy, and wasted time of humans. This is a net positive game to the world. In some respect the world of humans win, and the domain of entropy loses – if we are forced to put a name to it.

Personally I would feel deeply gratified if I could produce such a result that created a new benefit to either the world, or at the very least some small piece of it.

Interestingly enough, this speaks to an underlying theme which appeals to many people that are attracted to incubators of disruption, such as the Foundery. Many people do really feel that they would like to be part of something that changes the world. Perhaps this is because such incubators invoke the perceived “spirit” of Google, Facebook and other silicon valley heroes as an inspirational rally cry. I believe that the example of google maps does show that the present opportunity of disruptive technology can represent a possibility for such very real efficiencies and benefits to be created. Perhaps those seemingly naive passions that are stirred in the incubatees are valid, and should be released to find their form in the world.

So how do we harness this latent energy? Where do we direct it for the best chance of success?

Some of the technologies to be harnessed, and which represent the opportunity of disruptive technology:

  1. IoT (the internet of things):

At its most simple, this means that various electronic components have become sufficiently small, powerful and most importantly, cheap. It can become possible and economically viable to monitor the temperature, humidity, soil hydration of every single plant in a field of a farm. To measure the status of every machine on a production line in a small factory in the east rand, without bankrupting the owner with implementation costs.

Apart from sensors, there are actuators in the world such as smart locks, smart lights and the smart home which enable real-world actions to be driven and controlled from the internet. Together these provide the mechanism for the real world to be accessible to the digital world.

This extends beyond the “real“ real world: there are changes at play, not too far under the surface of the modern financial system, that are turning the real world of financial “things” (shares, bonds, financial contracts) into the internet world of financial “things” (dematerialised and digitised shares, bonds online, financial contracts online).

There are also actuators in this world, such as electronic trading venues and platforms which enable manipulation of digital financial contracts by digital actors of finance.

  1. Data is free:

The cost per megabyte of storage continues to drop exponentially, and online providers are able to offer services on a rental basis that would have been inconceivable a decade ago. The ubiquity of cheap and fast bandwidth enables this even more so.

  1. Computation is cheaper than ever, and simple to locate with cloud based infrastructure:

Moore’s law continues unabated, providing computational power that drops in cost by the day. Notwithstanding the promise of quantum computing which seems around the corner

  1. The technologies to utilize are powerful, free and easy to learn:

If you have not yet done so, have a sojourn on the internet across such topics as python, tensorflow, quandl, airflow and github. These represent free, open-source (largely) capabilities to harness the technologies above and make them your plaything. Not only that, the amount of free resources “out there” which can help you master each of these is astounding.

A brief exercise into trying to automate my house using python has revealed hundreds of youtube videos of similarly obsessed crazies presenting fantastic applications of python to automating everything from their garage doors, fishtanks, pool chlorine management systems, alarms etc. These youtube videos are short, to the point, educational, free and most importantly crowd moderated – all the other python home automation geeks have ensured that all the very good videos are upvoted and easily found; and the least fit are doomed to obscurity.

This represents another perhaps unforeseen benefit of the internet which is crowd-sourced, crowd-moderated, efficient and specific education. JIT learning (“just in time learning”) which means being able to learn everything that you need to accomplish a task five minutes before you need to solve it, and perhaps to forget everything almost immediately once you have solved it…. (That is an interesting paradigm to counter traditional education).

( P.S. if you have kids, or want to learn other stuff, checkout https://www.khanacademy.org/ )

Given the above points, it has never been easier for someone to create a capability to source information in real time from the real world, store that information online, apply unheard of computing power to that information using new, powerful and easy programming languages which can be learned online in a short period of time.

It might be a moot point that is valid at every point in time in every generation, but it has never been easier and cheaper to try out an idea online and see if it has legs.

So we have identified people with passion, a means of delivery and so now … what?

Those of you that are paying attention would realise that I have skirted the question of whether we have added any real value to the world, or feel that we can? Time will tell, and I would hate to let the cat out of the bag too early. But there is one thing that is true: if you are one of those misguided, geek-friendly, meaning-seeking, after hours change agents, or if you have an idea that could change the world, come and talk to us … the door is always open.

by Glenn Brickhill

RegTech: a key component of the burgeoning FinTech movement

Unpacking the opportunity to build a robust, compliance function with innovative tech solutions promising many benefits, derived from a number of applications.

http://www.memes.com/meme/554682
http://www.memes.com/meme/554682

A few months ago, I was lucky enough to be “the chosen one” at our consulting firm to join the rest of our team working at the Foundery. I was told that the Foundery was all about developing FinTech capabilities to solve inherent challenges within banking in a unique way. Thus, we had to be up-to-date with the new technologies in this space. “RegTech” was one of these new technologies that were on our radar, and I had to develop a research pack on it… My initial reaction was that of a student opening up her exam paper having no idea where to begin… and in this case, there would be no “winging it” either! Yet, as I embarked upon this journey, I was fascinated by the immense potential of reducing compliance costs for financial institutions using this technology of today to facilitate the delivery of regulatory requirements in an innovative way and wanted to delve deeper into this amazing world of RegTech. So, here are some of my discoveries from this journey:

What is RegTech?

RegTech, as the word suggests, is an amalgamation of regulation and

 https://www.trulioo.com/blog/regtech-solutions-for-regulatory-compliance-requirements/
https://www.trulioo.com/blog/regtech-solutions-for-regulatory-compliance-requirements/

technology, a niche carved out from Fintech. Javier Sebastián, BBVA Research’s expert in digital regulation, also explains that it is deemed a subarea of what is generically known as Fintech. He adds that RegTech providers who are, “harnessing the capabilities enabled by new technologies such as cloud computing, big data, and blockchain, are devising solutions to help companies across all sectors of activity ensure that they comply with regulatory requirements.”

What type of solutions does RegTech offer?

Globally, RegTech encompasses many different technologies that can reduce the cost of compliance & show commitment to high standards of regulatory compliance, through the use of advanced data analytics, risk & control convergence, and sustainable & scalable solutions. The solutions can fall into three buckets: Interpretation, Implementation & Optimisation.

  • Interpretation solutions are solutions that help in decoding regulatory requirements. These include regulatory gap analysis tools, compliance universe tools and training tools to track and understand the regulations & help build risk management plans thereof.
  • Implementation solutions assist in doing the actual work to meet the regulatory requirements. These include regulatory reporting & health check tools, incorporating everything from compiling and interpreting data, to producing gap analyses and ad-hoc reports.
  • Optimisation solutions are customised solutions that simplify the compliance process further, on an organisation level, through automation and machine learning. Management information, transaction reporting & analysis, and case management tools fall under this category. These tools empower compliance functions to make informed risk choices based on data-provided insights about the compliance risks the company faced and how it mitigates and manages risks.

Is there really a need for RegTech?

https://letstalkpayments.com/global-regtech-the-billion-dollar-opportunity/
https://letstalkpayments.com/global-regtech-the-billion-dollar-opportunity/

The cost of compliance in the financial services industry is high, and continuously rising, with the supervisory backdrop growing more complex, and constantly changing regulations and processes. According to the Consumer Financial Protection Bureau of the United States of America, on an average, large banks with an asset size of $1 billion to $100 billion, have total compliance costs of 1.4% of estimated retail deposit operating expense. Operations, HR and IT carry the largest share of these costs. The cost of non-compliance is even higher than the cost of compliance, with increasing penalties and fines paid by banks year-on-year.

 

https://www.trulioo.com/blog/regulatory-curse-regtech-opportunity/
https://www.trulioo.com/blog/regulatory-curse-regtech-opportunity/

Investments in regulatory software have the potential to address this immediate challenge of regulatory compliance which can lead to an ROI of 600+% with a payback period of less than three years, according to letstalkpayments. Hence, the global demand for regulatory, compliance and governance software is expected to reach USD 118.7 billion by 2020. But, yet it still remains a relatively small recipient of Fintech funding. This is because dominant, widely used solutions are yet to emerge, and financial institutions are often still unfamiliar with the technology. Regulatory reform is also not yet complete; uncertainty about the exact reporting requirements makes it harder for financial institutions to choose a particular compliance solution.

Is RegTech here to stay?

With growing regulations, there is a growing demand to oversee data, reporting, and operational processes. A growing number of start-ups have the potential to meet this demand. But, RegTech is about the application of technology to solve a specific regulatory problem, rather than the technology itself. Thus, each of the key players in the system has a distinct role to play in the growth of this technology, through the development of common industry solutions and successful integration into risk management frameworks within the wider regulatory change agenda. Financial Institutions have a primary responsibility for supporting this development, by creating IT and risk infrastructures that are capable of integrating these new solutions.

Supervisors and regulators can also provide support by creating an enabling regulatory environment, where financial institutions can safely share their challenges in compliance and opportunities. The UK is taking the lead to encourage the rest of the world to follow suit. In 2015, the Financial Conduct Authority (FCA) announced its 2016/17 business plan focussed on supporting the widespread adoption of RegTech. The FCA, through its ongoing roundtables and bilateral meetings, has provided a platform for collaboration between software developers, financial institutions and the public sector.

My final take on this?

South Africa has a lot of catching up to do!

by: Rachana Bedekar

Kenya’s mobile money story: the runaway success of M-Pesa

Development finance and corporate banks alike have long wrestled with the issue of banking the unbanked in the developing world, which would encourage broad-based socio-economic development on the one hand, as well as greater product distribution for the private sector banking institutions.

http://martinpasquier.com/wp-content/uploads/2013/11/Mpesa-agent-shack-kenya-afrikoin-mobile-money-martin-pasquier-emerging-markets-innovation.jpg
Image credit: http://martinpasquier.com

Development finance and corporate banks alike have long wrestled with the issue of banking the unbanked in the developing world, which would encourage broad-based socio-economic development on the one hand, as well as greater product distribution for the private sector banking institutions.

However, bringing greater financial inclusion to the bottom of the pyramid no longer means universal branch bank account ownership. Nowhere is this more evident than in Africa, particularly in one of the continent’s emerging fintech hubs, Kenya.

http://asmarterplanet.com/blog/2011/04/kenya-leapfrogs-the-rest-of-the-world-with-its-mobile-money-services.html
Image credit: http://asmarterplanet.com

In 2006, before M-Pesa was launched, 25% of Kenyans had access to banking products. By 2014, this figure had jumped to 68%. Almost half of these users do not have a formal bank account, indeed, formal banking sector inclusion in Kenya remains as low as 23%. However, the M-Pesa platform performs the essential financial transactions:  deposit and withdraw money, transfer money to other M-Pesa users and non-users, pay bills and purchase airtime. M-Pesa agents are as ubiquitous as pavement airtime kiosks, whose owners have been duly trained and are incentivised by clipping a commission per M-Pesa transaction. This is the kind of distribution network that most ATM-driven banks can only dream about.

This context is not unique to Kenya. Small wonder then that Sub-Saharan Africa is a global leader in the use of mobile money technology. On average 16% of the adult population actively uses a mobile money product in the region; the global average is 2%. Of the 18 countries in the world that have more mobile money accounts than bank accounts, only one, Paraguay, is not in Africa.

The significance of M-Pesa and the mobile money products like it is the potential it holds for retail financial access in the developing world and the money to be made in doing so. As the trail-blazer in this innovation space, Safaricom now generates a reported 10% of its revenue through providing a transactional banking platform for that segment of the population conventional financial institutions did not consider worth it to bank.

[Reprinted with permission from Observer Research Foundation].

by Lucy Corkin

 

Read the full story originally published by Observer Research Foundation website here.

 

The Observer Research Foundation is India’s leading policy think-tank seeking to lead and aid policy thinking towards building a strong and prosperous India in a fair and equitable world. ORF has the mandate to conduct in-depth research, provide inclusive platforms and invest in tomorrow’s thought leaders today.

lucy-corkin-rmb1-cropped2Lucy Corkin is Business Manager at RMB Africa, having joined RMB as a Class Of in 2012. She has a PhD in International Relations from SOAS, University of London, and has picked up a couple of languages along the way, including French, Portuguese and Mandarin Chinese. She is a regular contributor for the Observer Research Foundation where she gets to share her thoughts on goings on in Africa, the world of banking, and anything else that grabs her attention.

Banking on the future

As we travel down the road to banking innovation and focus on attracting incredible talent, it’s becoming increasingly clear that we have a slight problem Houston…it seems that banks have a bad rap!

As we travel down the road to banking innovation and focus on attracting incredible talent, it’s becoming increasingly clear that we have a slight problem Houston…it seems that banks have a bad rap!

Where to lay the blame seems a little less clear…it could be the multiple crises over the last few decades, could be recent high-profile scandals, sensationalised movies and TV shows with hyper-villainous bankers, or tales of “great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money” – whatever the cause, the reputation is certainly a little more tarnished than it was back in the day!

Now I’m not claiming that there is a whole lot of fireless smoke nor do I want to embark on a meaningless defensive diatribe, but I do feel compelled to encourage incredible talent back into the illustrious world of financial services.

GettyImages-168359274-FINAL_web

So, why is banking an exciting place to forge your career?

Firstly, banking has its heart in innovation – yes, innovation. Banking by definition sits in the middle of the economy and as much as that economy changes (all the time!) so must banking adapt. It is an industry that continually has to reinvent itself, continually innovating and redefining what it provides for its clients. Now, more than ever before, banks are feeling the pressure to reinvent themselves to thrive in a digital age and i future-proof the world of financial services. This is a great opportunity for innovators in non-traditional banking spheres to participate — engineers, developers, creatives, design experts — all have roles to play in the banking innovation ecosystem of the present and of the future. Diversity is essential for innovation. Banks are seeking talent from all walks of life and cultural shifts that have been slow in the past are accelerating as the industry recognises the need for great diversity of thinking.

Secondly, it’s a challenging and dynamic working environment. Banks are notoriously competitive, but it’s exactly that type of backdrop that allows you to participate in a highly stimulating career path. The opportunities for growth are immediate and long-lasting, and the energy and buzz that the environment provides create great opportunities for individual and team outperformance. Dynamic environments also have great scope for autonomy and mastery and, importantly, an opportunity to be part of creating a new future.

The industry is also one where learning is part of the everyday experience: banks are well known for structured in-house training, but they are also supportive of formal training programmes. Continual learning is essential for if banks are to continue to be innovative and is of great value to individuals working in the space as they follow their own development and leadership journeys.

And, lastly, we have fun! As we strive for lives where work and life come together, an industry that allows you to have fun while you work and that embraces your individual excellence in a great working environment is pretty appealing!

by Liesl Bebb-McKay

Listen to Liesl talking about RMB’s Athena programme on Classic FM here.  The Athena programme won the “Women Empowerment in the Workplace” award at the 2016 Gender Mainstreaming Awards.