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Monday, April 22, 2024

The platform pulsar

Finastra went into open banking orbit with its hybrid developer platform and API marketplace, FusionFabric.cloud. Now, CMO Martin Häring is charting a bold course to the financial stars

The international team coordinating the Event Horizon Telescope released the world’s first image of a black hole in April – an awe-inspiring visual rendition of the universe’s complexity. In peering 500 million trillion kilometres into the cosmos, mankind demonstrated an awesome capacity for farsightedness, brought about by innovation and collaboration.

And it’s precisely this vision that London-based Finastra, the financial technology company whose name fuses ‘finance’ with ‘astra’ – the Latin for ‘star’ – aims to emulate in the banking universe.

Recently named a UK Business Superbrand for the fourth consecutive year, Finastra works with more than 8,500 customers across 130 countries to deliver tech-based, B2B solutions to help institutions keep in step with their customers’ changing expectations.

In much the same way as nuclear fusion delivers the energy that sustains a star, it’s fair to say that the fuel that keeps Finastra burning bright, with an annual revenue of around $2billion, is the financial industry’s need to constantly reimagine the customer experience in the era of digital banking.

That’s certainly the view of Finastra CMO Martin Häring, who puts the challenge that financial institutions are facing in no uncertain terms: “Nowadays, banks are trying to answer the question: ‘how can we provide a better customer experience? How do we create the best customer experience?’. This is where banks have struggled so badly.”

But in the last two years or so, they’ve crossed the financial event horizon and started seeing fintechs less as competitors and more as collaborators, says Häring.

“They know that without agile, customer-centric programming, delivered by fintechs, they can’t survive.”

He’s echoing the prevailing wisdom that the age and size of incumbent financial institutions (FIs) can actually serve to hold them back, with delays in innovation threatening a black hole-like inward collapse if customers spot better provisions elsewhere in the expanding financial universe. That emerging reality catalysed a period of feverish activity from banks, with a rush to onboard fintechs through incubator programmes and strategic partnerships, or to home-grow tech solutions as the industry pushed towards digitisation.

Finastra’s most recent response to the new age of banking was launched in March of this year. Fusion Digital Front Office, a tablet-based platform that offers a simple way for community banks and credit unions to build upon customer relationships outside of their physical branches by deploying staff in mobile, responsive units.

It’s a well-timed provision, given that bank branches in the UK are closing at a rate of 60 per month, according to analysis conducted by Which? in 2018. Partners 1st Federal Credit Union and Vons Credit Union are currently piloting the Fusion Digital Front Office in the US, where branch closure rates also peaked to an all-time high last year.

For Häring, though, collaboration between fintechs and incumbents is simply taking too long to adequately serve customers by building solid new relationships in the virtual world. He’s also adamant that the singular, non-scalable partnership of a fintech to a bank is a terrible business model for entrepreneurial fintechs with their eyes on the global marketplace.

“I have spoken to a lot of fintechs, and they’ve said sometimes it takes between 12 and 18 months, from the moment they knock on the door of a bank, to the moment they can really integrate,” says Häring. “It’s a long, long cycle – it’s a very thorny and clunky model, it doesn’t scale, and it’s not the right business model for the fintechs.”

This was the key insight that led to the launch of FusionFabric.cloud – Finastra’s solution to delayed customer provisions in the financial sector. Supported by the Cloud capabilities granted by Microsoft Azure, Finastra’s platform-as-a-service portal connects innovative fintechs with modernising FIs, delivering upgrades to banking customers without those year-long development cycles.

Spurred on by Europe’s transformational revised Payment Services Directive (PSD2) and the open banking initiative, FusionFabric.cloud enables customer-serving breakthroughs, thanks to the plug-in or bolt-on possibilities offered by application programming interfaces (APIs). The platform hosts Fusion Creator, a portal that allows FIs to experiment with fintech APIs in shielded sandbox environments, while also allowing fintechs to understand the APIs of major banks – all in the secure, isolated environment guaranteed by Microsoft’s Cloud.

As it grows, FusionFabric.cloud will act as a vendor, displaying apps developed by the fintech community’s rising stars for purchase – a platform Häring is more than happy to compare to the Apple App Store.

“Every bank or fintech connecting to our platform will see what’s on the store, with its cost and a rating system. The fintech programs once, and then leaves it to the ecosystem to see if it’ll take off.”

Bearing in mind that Finastra works with 90 of the world’s top 100 banks, it’s an attractive deal for fintechs creating new, customer-orbiting services. And the ability to co-innovate with some of the banks partnered with Finastra is a rather different proposition to working one-on-one with a single bank and its unique digital architecture.

A hybrid business model

For Finastra, this platform-as-a-service is an exciting new nebula of possibilities – one-part marketplace, one-part development portal. In both cases, the software provider plans to monetise FusionFabric.cloud by charging at the point of engagement – judging the price charged by API call volume and API complexity.

“Overall, it’s probably a hybrid business model between what you see used classically by Amazon or Uber – purely connecting buyers and sellers – and a development platform, like the ones from Apple or iOS,” says Häring. That’s not to mention, of course, the power Finastra will accumulate – in the form of data and industry-leading tech – through industry engagement with the platform.

Some of the first APIs to be hosted on the platform were due to be announced at Finastra’s FusionONE hackathon and developer’s conference, taking place in London in May. The hackathon is Finastra’s opportunity to prove just how much quicker its FusionFabric.cloud platform can be for banks to better serve their customers with innovative tech.

“We firmly believe that most of the innovation will not happen in your own company; it will happen outside of it,” says Häring. “We want to stimulate hackathons on our platform and what we call 90-day sprints. From the idea creation, to a proof of concept with the client, it has to take only 90 days.”

This breathless pace of development may hark back to the ‘hacker philosophy’ of the early internet, but it’s in the future that Häring believes we’ll see the grandest changes for banking customers and the technology they use day-to-day.

“Next year, we’ll also be allowing third parties to put their APIs in our catalogue,” says Häring. “We’re completely open to that.”

Open banking at its finest – and it’s in this way that the company hopes to gather together a galaxy of services that pave the way for the bank-as-a-platform future that goes way beyond those explored by UK challengers, such as Starling, and is more akin to the universe as imagined by China-based financial services provider Ping An.

“I would compare what we are doing to OneConnect from Ping An. They build a platform where the bank is no longer just your financial advisor. The bank takes care of your whole life. It connects with health services, car services, almost everything that you touch as an individual user throughout the day,” explains Häring.

“The more banks collect data about you, which they can backend and monetise, the more they can cross-sell. So, a bank sees in its database that there is a client turning 18, and they have bought a car, and immediately there would be a cross-REST (representational state transfer) API call to an insurance company, saying ‘what is the best price
I can get for this 18-year-old person?’, and it will offer that through the banking portal to their client.”

It’s a dream that Finastra is closing in on through its FusionFabric.cloud platform, creating an API marketplace that will allow banks to centralise their customers’ financial lives, creating an undeniable ‘stickiness’ that’ll transform the very idea of what a bank can do for its customers.

It may feel like this consumer relationship revolution lies, like a distant black hole, hopelessly out of reach. But in its platform-as-a-service initiative, enabling light-speed technological upgrades and new constellations of collaboration, Finastra might just be launching an asset that reaches beyond the stars and into a bright future in which the customer is the centre of their own financial cosmos.

This article was published in The Fintech Finance Magazine: Issue #12, Page 22 & 23.

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