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With an experience of over two decades in finance, Wissam Khoury leads APAC business as senior vice-president and general manager of Finastra. Entrepreneur APAC interacted with Khouri to understand his innovative open banking and digitization of the sector. Here’s what this fintech operator believes and has experienced throughout his journey.
Emerging fintech trends amid the pandemic
The pandemic has accelerated requirement of digitalization and brought the future forward, though even prior to the pandemic, the pace of digitalization was fast. The emergence of fintech has resulted in huge possibilities to share information with third parties. According to Khoury, “These possibilities are centred around the creation of smaller fintech organizations which can utilize this financial information in order to create user-friendly solutions which are targeted for several reasons.” Increasing customer satisfaction while ensuring competitiveness across financial services and creating innovative ways aimed at digitalization are worth mentioning.
In terms of trends, financial apps and collaboration to achieve goals of open banking will be witnessed in future. Khoury stated that open APIs enable data sharing to be executed in a secured manner. Hence, these APIs are essential for the effective mechanism of open banking. Moreover, the major trend which is likely to be seen in the period of two-three years would be the nature of collaboration between fintech and traditional incumbent banks.
Keeping aside the competition, the collaboration of two financial institutions has been looked over to derive fruitful outcome from open banking. Khoury pointed that fintech institutions have a key role in evolution of financial services and the solutions provided in the market.
Transition in the banking operations—5 years down the line
Banks have different considerations ranging from risk management, regulations and compliances which hinder them from becoming only customer-centric. At the same time, technology banks have been the oldest services to emerge in the world. However, when fintech is considered to evaluate customer-oriented mechanism, 80 per cent of the focus is on customer. The difference between the two led to the digitization of the banking sector. Khoury claimed, “As of 2020, we define ourselves as the first open platform for collaboration in finance.” He further shared that Finastra has created a platform which will enable conventional banks to expose their APIs and invite innovation from anywhere.
Innovation cannot be cannibalized by anybody, so, by the optimum utilization of this platform, banks can rely on their own developers. They can look upon any system integrator or any fintech and start adding their services on top of the solutions which they have. In the coming years, banks are going to offer third-party services in a very consumer digital focused manner. Khoury remarked that fintech organizations know the art of acquiring clients and their area of concern are profitability as well as margin. Collaboration of fintech and banks bring value to the two institutions to benefit end customers.
Regulatory obstructions in the collaboration of fintech and banks
As a part of the worldwide survey conducted by Finastra, 56 per cent of the respondents stated that regulations are not aligned properly to facilitate the growth of fintech and digitalization. Primarily, the open banking system has to be supported by regulations and secondly, technology needs to be standardized for its smooth mechanism. There are not sufficient regulatory policies to facilitate this concept of open banking.
In order to highlight this facilitation, Khoury mentioned, “In Hong Kong and Singapore, the framework of open banking has been well-defined.” He further elaborated that the adoption of open banking is enormous in Singapore, wherein, flexibility and encouragement for the financial institutions pillars to attain the objective. Similarly, Hong Kong emphasized open banking since 2018. Encouraging synergies between fintech and banking by the regulators while bringing them together would be essential for open banking.
Reflecting over the statistics of payment and banking operations, Khoury shared that 99 per cent of the payments are digital through WePay and Alipay, among others. These transactions account for 45 per cent of the global transactions which are coming through wallets. He further added, “Payment is one of the biggest routes which have penetrated open banking with the support if regulations.” Collaboration of the financial institutions has the potential to provide innovation solutions.
Scope of making payment gateways collaborative
Regulation and true implementation of open banking as well as the evolution of fintech are likely to make solutions collaborative. The margins on payments have minimized when unbanked or underbanked communities are discussed about. Khoury affirmed that over 70 per cent of the population in Southeast Asia is unbanked or underbanked. In his viewpoint, “The consolidation will happen on the basis of highly competitive, retention rate, collaborative approach and additional services on top of payment will be the factors which will increase their margins.”
Market insights of Finastra
Being the first and true open banking platform for innovation as well as collaboration, Finastra aims at unlocking the potential of people and businesses to enable them to collaborate together. It has a platform named FusionFabric.cloud which can be deployed by banks to have access to their internal system through exposed APIs to any third party. Khoury further explained, “Whether it is a fintech, developer or even a university, this platform has been created in partnership with Microsoft on cloud where the app can be deployed and manage it.” Besides, the source of downloading this app has also been developed by Finastra team which is similar to Apple Store.
All the underlying issues faced by financial institutions can be dealt with when fintech runs on the marketplace of Finastra which has a customer base of over 8,500 customers.
Fund raising strategies for fintech
The pandemic and economic slowdown has created a burden on fintech organizations. Some of them might disappear if they don’t receive sufficient funding. Khoury opined, “In my point of view, funding can be attained from varied sources, but, majorly it might come from other fintech organizations.” He even mentioned that funding can also be raised through banks by way of collaboration in three ways. First, investing in fintech to create a new bank under their umbrella with different name. Second, by investing in existing fintech to work for them or take some stakes in their business. The third one is to get market opportunity and access, this is where, Finastra comes in the picture.