FutureBank brings rapid integration and modernisation to Mastercard Engage’s global customers

FutureBank, a leader in open banking and payments technology, has been accepted into the Mastercard Engage network as a Digital First partner. The move will allow Mastercard customers to fastrack their modernisation efforts through the FutureBank platform’s unique integration technology that allows banks and fintechs to quickly connect to the best banking capabilities on the market.

Engage, Mastercard’s global partner network, offers its customers access to a qualified network of technology and fintech partners so they can rapidly build, deploy and grow Mastercard payment solutions in an easy and cost effective way. In 2022, more than 150 Engage partners helped their customers deploy innovative solutions on more than 500 million accounts using Mastercard products and services.

Together with Mastercard, FutureBank will work on the problem of instant issuance and instant credit scoring in emerging markets. This will help ensure qualified customers can quickly access credit, boosting financial inclusion. In addition to this there will be a strong focus on helping legacy banks globally modernise their platforms to enable the instant issuance of cards.

“FutureBank has a proven track record of helping banks and fintechs accelerate time to market by making it easier to embed vital new financial services and make them available to their customers and partners. Far too many banks are still operating on core banking systems that are encumbered with technical debt and struggling with the challenge of integrating older infrastructure with innovative cloud based fintech offerings. Our integration layer provides a bridge to connect core banking and modern fintech to easily launch innovative new financial products and Mastercard saw the benefits this could deliver to banks, irrespective of their size, location, or technology footprint,” explains Sergio Barbosa, CEO of FutureBank.

Participating banks will also benefit from FutureBank’s sandbox environment, which provides mock data and code snippets to code against its platform in real time, no matter the language. An online account test simulator and SDK allows developers to test real world scenarios and craft tailormade embedded finance solutions that answer their customers’ unique requirements. FutureBank’s own extensive partner network also provides its customers with sought after capabilities around KYC, crypto, security and more.

“The Mastercard Digital First Program aims to assist banks in their critical journey to modernise and digitise their offerings. A surprising number of banks still struggle with this due to factors like internal capability constraints and budget availability. FutureBank’s platform already has many of the major core banking adapters in place, enabling the rapid and cost-effective integration of Mastercard products as well as other fintech options,” explains Pieter de Wet, Global Business Development and Partnerships Lead of FutureBank (also referred to as ‘The Sales Guy’).

Giving context to how efficient the integration process can be, Barbosa shared that FutureBank reduces integration costs by up to 85%, supports up to 80% of customer-facing

functionality off-the-shelf, and natively integrates with the majority of core banking infrastructure today, making it the most compatible banking platform in the market.

Becoming an Engage network partner will also deliver meaningful benefits to FutureBank.

“The partnership affords FutureBank a unique opportunity to extend our global footprint. The successes of the network are well known and we are excited about the prospect of working more closely with many of these respected partners. Collaboration has been at the heart of FutureBank’s culture since our inception and this partnership will allow us to work side by side with other industry innovators, which can only benefit our company and our existing customers,” Barbosa says.

FutureBank and Paymentology partner to deliver instant issuance

Source: TechCentral (13 December 2023)

Open banking and embedded finance platform FutureBank has announced a partnership with leading global issuer-processor Paymentology to provide banks and fintechs with streamlined integration to modern card issuing and processing technology, enabling instant issuance of virtual cards.

Paymentology provides banks, fintechs and telcos with the technology to issue and process any type of physical or virtual card through its multi-cloud platform, offering both shared and dedicated processing instances. The company operates in over 50 countries bringing a deep, local market knowledge across 14 time zones.

FutureBank is an open banking platform and fintech marketplace that helps banks, brands and fintechs integrate new banking and financial service products into their core systems and deploy them at scale with minimal cost and effort.

FutureBank has now joined forces with Paymentology to solve a critical business need in the financial services world. The collaboration of the two companies enables instant issuance of virtual cards even for financial institutions constrained by their core legacy banking systems, offering traditional banks a digital edge and speed without the need for a major replacement.

Instant issuance is a game changer

One of the payment challenges facing banks and fintechs globally is the ability to issue card payment instantly to their customers, individuals and businesses. Today, legacy core banking systems work in batch environments, while modern fintech use cases and user journeys require near real time responses. FutureBank and Paymentology tackle this issue at its source by enabling instant insurance through deep integration of both platforms, allowing for both virtual and physical cards to be available for use immediately upon request. Instant issuance allows financial institutions to print their customers’ payment cards at the time of onboarding and order or display them instantly as virtual cards on a mobile phone.

“The partnership solved an acute pain point. Paymentology’s platform enables instant issuance of tokenised cards, with easily configurable controls, and FutureBank’s integration capabilities into a range of existing core systems enables issuers to accelerate product development velocity in co-existence with their legacy systems. This combination enables even the most legacy of core banking infrastructures to participate in the modern payment ecosystem,” said FutureBank CEO Sergio Barbosa.

Keeping cards top of wallet

“Allowing institutions to instantly produce and activate cards meets the growing expectation of younger and digitally-savvy customers who are used to services on-demand. If customers can open an account on a digital platform in a matter of minutes, why would you make them wait days or sometimes weeks to receive their payment card? Instant issuance is a valuable addition to the customer journey that banks, retailers and MNOs are striving towards. The goal, after all, is to get your customer securely transacting as fast as possible,” Barbosa shares.

“Banks and fintechs globally reach out to Paymentology with a consistent problem statement: They are under pressure to keep up with more agile competitors who are developing products faster and are capturing market share. Examples include payment via mobile phone, wearable payment devices, targeted loyalty programmes and digital onboarding.

Image: Paymentology’s David Oppenheim

The partnership with FutureBank will facilitate digital first product rollouts on top of existing core architecture, reducing cost, complexity and risk on their path to modernisation,” said Paymentology ecosystem partnerships global head David Oppenheim.

The two companies have already tested their partnership on several customers in the Europe, Middle East and Africa region, including the launch of a neobank and the modernisation of an existing legacy bank.

Article source:

  1. TechCentral: https://techcentral.co.za/futurebank-paymentology-partnership-glopr/236862/ [13 Dec 2023]

FutureBank and Direct Transact partner for embedded finance in sub-Saharan Africa

Image: Christo Davel

Direct Transact, the largest independent provider of banking and payment solutions for banks and brands in South Africa, has teamed up with open banking platform and fintech marketplace FutureBank to accelerate its technology platform capabilities further. The partnership will facilitate the rapid roll-out of embedded finance in sub-Saharan Africa.

Embedded finance is the fintech practice of building financial products or services into non-financial brand customer experiences. It takes collaboration between the brand on whose platform the financial moment is offered, and the financial institutions and fintech partners who enable the financial feature to make it happen. Classic examples of embedded finance include perfectly timed insurance, quick payment solutions, or buy-now-pay-later offers during online checkout.

Launched in 2002, Direct Transact was the first provider of outsourced core banking capabilities and financial services software to more than 70% of South African banks. It currently processes over R40 billion monthly. In addition to being a technology enablement partner to banks, it also helps brands launch financial products and solutions via alliance banking and embedded finance.FutureBank specialises in providing great abstraction layers to banks and financial technology companies

FutureBank, meanwhile, is an open banking platform and fintech marketplace that helps banks, brands and fintechs globally integrate new banking and financial service products into their core systems and deploy them at scale with minimal cost and effort.

“Direct Transact believes modern and intelligent banking should be able to plug in and configure composable solutions from exciting third parties who bring new user-friendly elements to the banking experience. FutureBank is a niche fintech company that helps us further enhance our existing capabilities,” said Direct Transact chief commercial officer Christo Davel.

“FutureBank specialises in providing great abstraction layers to banks and financial technology companies. Their technology speeds up and simplifies fintech integrations between banks and third-party fintech partners. Thanks to our partnership, Direct Transact’s interface layer is now even simpler, allowing faster connection.”

Primed for growth

Direct Transact’s work with FutureBank has ideally positioned the company to address the rapidly growing embedded finance market in sub-Saharan Africa. The latest collaboration between the two companies builds on an established relationship and a shared vision for regional innovation and growth.

Accenture analysis has shown that embedded finance for the small and medium-sized business sector is set to boom and could capture up to 26% ($32 billion) of the global SME banking revenue by 2025.

“Embedded finance epitomises the collaborative innovation that African organisations thrive on. It allows multiple players to combine their strengths, allowing a whole new generation of nimble new players to leverage the foundations of established banks to reach new customers with relevant products and services.

“The partnership between Direct Transact and FutureBank will facilitate the rapid growth of embedded finance offerings, helping companies reach the scale they need to ensure sustainable growth,” said Sergio Barbosa, Global Kinetic enterprise software development house CIO and CEO of its open banking platform, FutureBank.

However, without the necessary technical expertise, delivering embedded finance services is not simple.

Image: Sergio Barbosa

“To seamlessly embed financial capabilities is technically complex, made more difficult by many banks’ rigid legacy systems. While secure and compliant, Direct Transact’s systems and technology are flexible. And, after our deployment with FutureBank, Direct Transact can rapidly offer more of its capabilities within its customers’ existing technology stacks. This means banks, payment providers and brands can rapidly design and launch new and exciting embedded finance offerings to their clients – solving today’s strategic and client needs and building tomorrow’s solutions today,” Davel said.

The nature of the partnership between FutureBank and Direct Transact promises a bright future for both organisations when it comes to embedded finance in the sub-Saharan region.

“Compatibility with Direct Transact’s core banking capabilities enables us to offer additional capabilities around core banking in the sub-Saharan market.  Our partner network is extensive and can benefit from our interoperability and partnership with Direct Transact as the leading core banking provider in the region,” Barbosa said.

The partnership also means FutureBank can offer Direct Transact’s robust, comprehensive core banking capabilities to their clients, who are notable players in the global fintech ecosystem. It’s a match made in fintech heaven,” Davel said.

Article source:

  1. TechCentral: https://techcentral.co.za/direct-transact-futurebank-embedded-kinpr/236392/ [05 Dec 2023]

FutureBank and IDVerse Partner to Fight Cybercrimes

London, UK – 5 September 2023  – The customisable and compliant embedded finance platform, FutureBank, has partnered with world-leading digital ID verification company IDVerse (previously known as OCR Labs Global) to further its digital transformation and accelerate customer onboarding through swift and secure digital identity verification (IDV).

Through this partnership, new FutureBank customers can access the IDVerse software as part of its offering. IDVerse customers looking for a middleware platform can connect their API credentials to benefit from FutureBank’s platform. 

Bank technology is clunky and rigid, and it needs forward-thinking technology partners to stay up to date. Middleware platforms offer technological flexibility that banks and fintechs can’t build themselves, thus preventing downstream fraud and supporting the full customer journey. 

FutureBank is an integration platform for core banking providers that embeds finance services. It acts as the glue between a bank and a third-party provider they want to integrate with. It helps banks and fintechs launch new products better, faster and more securely.

IDVerse is the most certified Identity Service Provider (IDSP), with 20 certifications for the Right to Work, Right to Rent and Disclosure and Barring Service (DBS) from the United Kingdom’s Digital Identity & Attributes Trust Framework (DIATF). 

Through its Zero Bias AI™ tested technology, IDVerse is pioneering the use of generative AI to train deep neural network systems to protect against discrimination on the basis of race, age and gender.

Sergio Barbosa, CEO at FutureBank, said, “Generative AI is breeding many different fraud types. With ChatGPT, fraudsters can create very authentic documents and profiles for people at a low cost. We were impressed by IDVerse’s capability to stop fake IDs from making their way through the system and its fully automated approach that works better than humans.”

Barbosa continued, “Cybercrime is currently the third biggest economy in the world, and predictions show that in the next 18 months, it will be the biggest economy in the world. We are delighted to partner with IDVerse to protect our customers from unwanted attacks.”

Russ Cohn, General Manager EMEA at IDVerse, added, “It is already very easy to create a realistic fake person in as little as 15 minutes using online tools readily available on the internet. Synthetic media is becoming the new tool of choice for fraudsters looking to make money. We estimate that there is a 400 percent year-on-year increase in the use of deepfakes in creating fake identities.”

Cohn continues, “Our fully automated identity verification system can offer FutureBank customers a reliable solution to spot deepfake accounts that fraudsters are increasingly trying to create. IDVerse’s cutting-edge technology maps the facial genome and can detect below-the-skin activities, such as a heartbeat changing the colour of the skin, which the human eye cannot see. These natural yet invisible patterns from faces help verify that an image is of a real human, not a deepfake.”

For more information, visit www.idverse.com

Data sources and PR mentions

  1. https://www.statista.com/chart/28878/expected-cost-of-cybercrime-until-2027/
  2. IDVerse Article
  3. FFNews
  4. FinancialIT
  5. Finextra Press Release

The Disruptive Force of Fintech: How will these Top 5 Trends evolve in 2023?

The Disruptive Force of Fintech: How will these Top 5 Trends evolve in 2023?

The finance industry has undergone a major transformation over the last decade, driven by the rise of fintech. But are these trends here to stay, or just a passing fad? Let's dive into the top five fintech trends and examine their future potential:

  1. Artificial Intelligence and Machine Learning - AI and ML have been hailed as the future of finance, but are they really? While these technologies can automate certain tasks, they still have limitations and can make mistakes. It is predicted that AI and ML will play a major role in finance, but it will not fully replace human decision-making. For example, in recent years, several banks have implemented AI-powered chatbots to provide 24/7 customer service, but human oversight is still required to resolve more complex issues. Moreover, according to a recent survey, about 60% of consumers trust human customer service representatives more than AI-powered chatbots.
  1. Digital Payments - The convenience factor is driving the shift towards digital payments, but will this trend continue to grow? It is predicted that digital payments will continue to increase in popularity, with more people valuing the speed and ease of digital transactions over traditional methods. For example, mobile payment platforms such as Venmo and PayPal have seen rapid growth in recent years, and there is rumour of Twitter becoming a payments platform.  More businesses are now accepting digital payments as a result of the pandemic. In addition, the rise of contactless payments, enabled by near field communication (NFC) technology, has further fuelled the growth of digital payments.
  1. Blockchain - Blockchain-powered platforms and ecosystems are often touted as the solution to all financial problems.  We are through the trough of disillusionment, but we are yet to see wide adoption. It is predicted that blockchain will see widespread use in finance in the coming years, as the technology matures and more people become familiar with it. Several countries are exploring the use of blockchain for central bank digital currencies, which could potentially revolutionize the financial system. Moreover, blockchain has the potential to increase transparency and security in financial transactions, as well as reduce the costs associated with intermediaries.  As we have seen with recent events like what happened to FTX for example, the volatility in this space is alarming to many individuals and institutions.
  1. Open Banking - Open Banking has the potential to change the financial landscape, but will it actually be able to deliver on its promises? It is predicted that open banking will continue to grow, as more financial institutions open up their data to third-party providers and consumers become more comfortable sharing their financial information. In recent years, several countries have implemented open banking initiatives, allowing consumers to easily access and compare financial products and services from multiple providers. Additionally, open banking has the potential to increase competition and drive innovation in the financial industry, as well as provide consumers with more control over their financial data.
  1. Neobanks - Neobanks have disrupted the traditional banking industry, but are they here to stay? It is predicted that neobanks will continue to challenge traditional banks and win over consumers, but it remains to be seen whether they will be able to compete in the long run with established players in finance. For example, neobanks such as Monzo and N26 have attracted millions of customers with their mobile-first approach and low fees, and traditional banks are starting to respond with their own digital-only offerings. However, the challenge for neobanks will be to maintain their growth and compete with traditional banks, who have the advantage of established customer bases and established trust in the market.

The fintech industry is full of potential, but also full of uncertainties. These 5 trends are set to create the foundation of our future financial landscape, but in 2023 and beyond we will see them disappear into the background for most individuals and institutions with their convergence into, and the rise of, embedded finance.  There will be consolidation in the banking ecosystem across traditional banks over the next few years as they compete to remain relevant, and brands will begin to claim ownership of the financial data associated with individuals and institutions.  The individuals and institutions in turn will relish in the convenience of a world where they don’t really need to understand the intricacies of the financial ecosystem, they can just focus on doing whatever it is that they’re doing.  

Infographic on the Top 5 Fintech Trends in 2023

Brainstorm Feature: Finding the data to reach Africa’s unbanked

Article Source: Brainstorm October 2022 - ITWeb | Featuring Sergio Barbosa, CEO, FutureBank

Transforming the Know Your Customer verification process will unlock countless opportunities for Africa’s unbanked to participate in the digital economy.

Sergio Barbosa is featured in ITWeb's Brainstorm Publication by Joanne Carew (14/10/22).

Read the PDF version of the blog below:

Subscribe to ITWeb's Brainstorm to read more articles from the Business Technology Magazine here.

Reaching new customers through fintech partnerships

Sergio Barbosa, CEO, FutureBank

Co-founder and CIO of enterprise software development house, Global Kinetic, Sergio directly heads its open banking platform, FutureBank. A skilled software engineer, innovative product developer, and keen business strategist, he has participated in several notable fintech milestones, including building the southern hemisphere’s first digital-only bank all the way back in 2002.

Back in October, I made an argument for open banking’s relevance to regional American banks and credit unions. I listed several ways that open banking platforms could benefit institutions like these – specifically those with under a billion dollars in assets.

My focus in this post is on the enormous potential banking-as-a-service (BaaS) and banking-as-a-platform (BaaP) have for helping traditional banks reach new customers, including those that were uneconomical, unreachable, or unheard of in a physically restrictive and data deficient banking paradigm.

Platforms that leverage APIs and facilitate integration can enable banks to benefit from fintechs’ data-driven and customer-centric approach to innovation by offering them the embedded finance foundation that fintechs need in return for greater customer acquisition on the bank side.

They can also enable banks to develop highly engaging new offerings faster, more efficiently, and with far less risk than before. Both fintechs and banks could leverage a combined customer data set in various ways – with their approval, of course.

Let’s look at three broad opportunities banks and credit unions have to gain new customers or members through open banking partnerships.

Meeting the needs of niche markets

What bank is the best fit for serial house restorers? And for TikTok entrepreneurs? Convenience store franchisees? Everything counts in large amounts, as the song goes, and the economies of scale that digital technologies can provide could bring millions of potential customers within reach of the smallest bank. Sifting through them, you’re bound to find a market, even a very niche, geographically distributed one.

Going “niche”, as they say, means targeting market segments and communities united by emotional or cultural bonds, personal concerns, and unmet financial needs that have little to do with geography. 

US banks and credit unions have long focused on the needs of narrowly-defined communities, but their geographical footprint has almost always been limited by cost considerations related to their physical branch and ATM networks, if not by their charters too.

No more. Digital channels have freed them – and their competitors – to market to prospects and serve customers far beyond their home county, state, or region without much additional outlay. To get a good return on investment, however, they have to hone their value proposition carefully – and that may require further specialization.

Going “niche”, as they say, means targeting market segments and communities united by emotional or cultural bonds, personal concerns, and unmet financial needs that have little to do with geography. These groups may always have been there – ethnic, racial, or sexual minorities, for example – or could be entirely new – think of crypto-asset traders and gig economy workers.

It’s an approach that many smaller financial institutions see as a way to differentiate themselves from competitors large and small, gain customers, and profit from value-added services delivered through low-cost channels – even as banking infrastructure and traditional banking products are commoditized.

Some examples:

All of these businesses reflect something profoundly different about the open banking paradigm: banking is increasingly conceived of as something rooted in everyday life, occasioning a far wider range of interactions at many more moments in the day.

High-context recommendations – product and service cross- or up-sell, meaningful communication and useful advice, shortcuts to the next step on any given journey – these all depend on knowing your customer intimately and understanding the motivation behind their transactions.

Fintech partnerships help these financial institutions:

Meeting the needs of the unbanked

The US federal Community Reinvestment Act obliges financial institutions to serve neighbourhoods across a range of incomes in their catchment, but industry consolidation, commercial imperatives, as well as patchy enforcement have seen low-income communities – urban as well as rural – hit disproportionately hard by branch closures spanning decades. It’s a leading cause of financial exclusion, together with lack of government ID, insufficient credit history, and unaffordable or unpredictable service fees.

Open banking platforms can go a some way to addressing financial exclusion while helping mid-sized banks and credit unions reach new customers at reduced risk. 

According to the US Federal Reserve, 6 percent of adults in the United States are unbanked, while 16 percent are under-banked (the FDIC has similar figures). These millions of Americans represent frustrated human potential and an untapped market. Digital service provision is not a cure-all, as the Fed pointed out just before the onset of the pandemic, but open banking platforms can go a some way to addressing the problem while helping mid-sized banks and credit unions reach new customers at reduced risk.

Partner-provided data concerning devices, payments, online and social media interactions, etc., combined with third-party AI systems help manage risk and improve efficiency, so that the market can be served more cheaply and effectively.

Fintech partnerships help these institutions:

Meeting the needs of other businesses’ customers

Open banking – BaaS in particular – has opened many senior executives’ eyes to the exciting potential in distributing financial services over third-party channels, essentially reaching and making money from people and businesses with which their institution does not have a direct relationship.

With embedded finance, the bank brand may take a back seat to another – a racing car maker, a global charity, even a Kardashian or two – but the opportunities to extend your reach are immense. 

These third parties are often fintechs, but they could be any enterprise looking to leverage banks’ money-moving infrastructure, rich troves of data, and competencies in areas like fraud detection and prevention, identity and access management, and regulatory compliance. Banks, in turn, either gain revenue directly from the fees they charge or benefit from their products’ relatively cost-effective exposure to a wider, captive audience.

Some examples:

Embedded finance is an especially promising development. It allows financial services providers and an almost limitless number of non-bank brands to integrate financial services seamlessly in websites, apps, games, and the point of sale for greater convenience and deeper engagement. The bank brand may take a back seat to another – a racing car maker, a global charity, even a Kardashian or two – but the opportunities to extend your reach are immense.

BaaS partnerships help these institutions:

You don’t have to be a fintech startup to be excited by the future these partnerships will help build. Regional banks and credit unions have as much to gain as any other stakeholder, and with the right partners and a few good ideas, they will.

FutureBank is a fintech marketplace and technology platform enabling banks and credit unions of all sizes to test a wide range of third-party products at scale. There is minimal upfront cost and significantly less risk involved in making an investment. Compatible with over 6000 financial institution back-end systems, we offer a single integration point for fintech technologies for rapid time-to-market.

Looking to explore new opportunities in open banking?

Contact FutureBank for a presentation.

Solving the software integration challenge, FinTech's last mile

Sergio Barbosa, CEO, FutureBank

Co-founder and CIO of enterprise software development house, Global Kinetic, Sergio directly heads its open banking platform, FutureBank. A skilled software engineer, innovative product developer, and keen business strategist, he has participated in several notable fintech milestones, including building the southern hemisphere’s first digital-only bank all the way back in 2002.

Eyes on fintech's last mile

Many of the banks and credit unions that we speak to are no less “progressive” than their tier-one peers when it comes to recognizing the potential of platform banking or banking-as-a-service. They just don’t have the same budgets to spend on new talent, in-house innovation hubs, and large-scale partner programs.

You’ve got to spend money to make money though, right? That’s where fintechs can help by providing banks with reasonably priced know-how and out-of-the-box financial services developed with an entirely new focus on the digital end customer.

There are new sources of revenue to be gained in both directions, of course. My focus in this blog post is, however, not on the opportunities for value creation and exchange in bank–fintech partnerships – as central as that topic is to everything we do at FutureBank. Today, I want to look at a common hurdle for fintechs getting to that point: software integration. It’s fintech’s last mile.

Software integration: Here be monsters

The promise of a stress-free go-live – “fast go-to-market”, “rapid ROI”! – typically features in every piece of fintech marketing material, with assurances based on the modern, lightweight deployment model and excellent APIs. Things tend to run differently in reality, however, and fintechs often find themselves spread thin when integrating their technology at the bank.

Implementation teams are usually ignorant of what they will find at the client. Even smaller banks have many moving parts, constituencies, and the various systems they use are technologically complex and interface in unpredictable ways. The scale of banks’ regulatory burden, especially as it pertains to digital security and risk management, is also something few fintechs really understand, despite it being a factor in nearly every answer banks give to questions fintechs ask.

When the inevitable complications arise during integration, time is lost and costs – all the fintech’s own – pile up. Progress updates may remain cordial, but the project draws senior staff away from other important aspects of their business, including landing the next sale and building the next killer feature of their product.

Sound familiar?

Solving the software integration problem for fintechs and their customers

As enterprise software integration experts of long-standing, my colleagues and I at Global Kinetic have seen this dynamic – or something like it – in play many times. Knowing the nature of the beast ahead of time would help providers plan and act with speed and precision, freeing them sooner to return to what they enjoy doing most.

That’s why we built FutureBank, a banking-as-a-service platform that integrates into the world’s most widely deployed core banking systems. It provides fintechs with a fully kitted-out digital banking sandbox for testing their software integrations against these and helps determine the level of custom work required for non-standard or customized versions out there.

Flipped 180 degrees, FutureBank becomes a fintech marketplace where banks and credit unions are able to discover, test, and deploy pre-integrated third-party products and services at low cost, with considerably less risk than they would before. We have many products on the platform, and we onboard new providers every month.

What is the experience like for our fintech customers? I’ll describe a couple of case studies in future blog posts.

Partnerships are the lifeblood of open banking. Contact FutureBank to discover how we can help you work better together.

Read our previous post here: Regional banks have a big opportunity in open banking

Regional banks have a big opportunity in open banking

Sergio Barbosa, CEO, FutureBank

Co-founder and CIO of enterprise software development house, Global Kinetic, Sergio directly heads its open banking platform, FutureBank. A skilled software engineer, innovative product developer, and keen business strategist, he has participated in several notable fintech milestones, including building the southern hemisphere’s first digital-only bank all the way back in 2002.

Pandemic spurs digital transformation drive

Even as this pandemic pushed digitalization to the top of banks’ agendas, associated business stresses cut into their capacity to respond. Forced to prioritize measures to survive now over thriving the year after next, they re-allocated resources overnight. IT budgets were hit hard. Big digital transformation projects – including open banking initiatives – were cut or scaled back at HSBC, ING, RBS, and other boldface behemoths.

At smaller financial institutions, the situation was often critical. Regional banks and credit unions that were further along in their transformation journeys were in a significantly better situation than those that were not, but everyone was stretched by the new imperative to serve their customers and members remotely in challenging times.

And yet. Over 18 months since the drama of that first lockdown, thousands of US financial institutions can proudly say that they got there faster than they thought they would. Many of their customers took a leap into the digital void with them, and a large percentage of those will continue using self-service channels after the masks come off for the last time.

No time to wait on open banking

We aren’t out of the woods yet, mind you, not by any measure. Margins are thin, fintechs continue targeting the most profitable lines of bank business, and unprecedented self-service banking rates, otherwise a reason to celebrate, are negatively impacting customer satisfaction rates across all ages.

There are strong indications that traditional banks and credit unions, including the very largest, are losing primary account status to digital-only banks at a faster rate than before. As reported by Ron Shevlin of Cornerstone Advisors, “Roughly one in four Gen Zers and Millennials now call a checking account from a digital bank their primary account. That’s about double the percentage it was at just nine months ago” (my emphasis).

Financial institutions of all sizes – but small- to mid-sized ones especially – face some level of threat from categories of companies no-one would have heard of 20 or even 10 years ago. The point is that banking is being reshaped by forces outside of the industry’s traditional spheres of influence and ignoring it won’t make it go away. In a July 2021 report with a focus on the United Kingdom, McKinsey says, “If open finance continues to accelerate it could reshape the global financial services ecosystem, change the very idea of banking, and increase pressure on incumbent banks.”

Bank consolidation declined somewhat during the pandemic but is predicted to lurch upwards in the coming years, driven in part by digitalization. Change is no longer negotiable for incumbents hoping to be around in twenty years, and it has to encompass pretty much everything about the business. McKinsey again: “It will be imperative to understand and respond to these changes, reimagine offerings, adjust business models, and forge successful partnerships with fintechs or tech companies, to ensure continued success and relevance.”

Regional banks and credit unions face a dilemma like few anyone in the industry remembers. With barely any time to catch their collective breath, they must set about the next stage of their digital transformation. Covid-19’s systemic side effects did nothing if not make the case for open banking stronger, more urgently central to American financial institutions’ future prospects than it was before.

Open banking is also a significant opportunity

Research by the Digital Banking Report shows that over half of banks with assets of $100 billion or more already have an open banking strategy in place or say they will have within a year. Overall, 24 percent of financial institutions (all tiers) have a strategy, and another 21 percent plan to implement one in the next two years.

In the United States, regulators are not setting the open banking agenda, as they are in Europe, Australia, India, or Brazil. It’s commercial self-interest, good old-fashioned competition in an ever widening ecosystem owing its lush good health to technical innovation and the mutual benefit of value exchange. The APIs on which much of this ecosystem rests have contributed immeasurably to Big Tech’s successes and are driving the so-called “platformication” of nearly every business model out there, including banking.

Open banking can benefit banks and credit unions in several important ways, including:

I will go into some of these in greater detail in my next couple of blog posts. Today, I’d like to underscore how vital third-party partnerships and cross-organizational collaboration is in achieving each of these benefits, especially for institutions where the digital mindset is not yet pervasive and relevant expertise thin on the ground, which is to say, most banks and credit unions.

With open banking, small isn’t the big deal it used to be

I recently read that JPMorgan Chase’s annual tech spend is around $8 billion more than the combined amount at all 94 US banks with assets between $10 billion and $100 billion. Still, no institution – not even JPMorgan Chase – can do it all, well, and at the speed of change we are seeing. The days of going it alone are over.

There is a growing ecosystem that combines the best resources, niche products and services, a ton of data, and existing and potential customers. Using APIs, smaller banks can access the ecosystem and contribute to it through banking-as-a-service or -platform models. They can do pretty much everything their giant competitors do, faster than they could have before, with less risk and fewer development and operational costs, relatively speaking.

Partnering for the best value in open banking

Developing an open banking strategy and navigating the highly dynamic fintech ecosystem isn’t easy. Banks without dedicated DevOps teams and sandboxes usually need a partner to guide them through the process of testing and integrating complementary third-party products and services or facilitating the same for their prospective fintech partners.

Futurebank FinTech Marketplace

FutureBank is a fintech marketplace and technology platform enabling banks and credit unions of all sizes to test a wide range of third-party products at scale. There is minimal upfront cost and significantly less risk involved in making an investment. Compatible with over 6000 financial institution back-end systems, we offer a single integration point for fintech technologies for rapid time-to-market.

I would like to invite any bank or fintech planning on or considering a banking-as-a-service or -platform play to view our offering, which I believe is unique in the market for its focus on both ends of the open banking spectrum, if not also the breadth of pre-integrated technologies on offer.

Looking to protect your institution’s future and explore new opportunities in open banking? Contact FutureBank for a presentation.

It is over for Bitcoin

Bitcoin will never make it.  It has no practical application.  I mean, how can you rely on a currency whose value in real terms changes every second?  You cannot expect the lay person to accept that the price of the BigMac on the menu behind the checkout counter is going to change many times before they get to the front of the queue to place their order.  And then they must wait for 10 minutes while their payment is confirmed in China (because that is where 65% of all Bitcoin is mined) and a ton of coal is burned?

I am sure you hear comments like this all the time when you are not in your Crypto echo chamber.  And they are very valid with one caveat.  The reference point for comparison is the current status quo of what money is and how we pay for things.  The problem with this is that Bitcoin lives in a parallel financial dimension.  To compare it to Fiat money like the US dollar, or to compare the payment mechanism to what we have available from the card schemes of VISA and Mastercard, would be like comparing a car to an aeroplane.  They both can get you from A to B, but in very different ways.  Cars and planes live in the parallel transport dimensions of land and air, respectively.  If you had to use the plane to get from A to B, but it had to stay on the ground all the time, it would be impractical and frustrating.  And trying to get a car to fly… well good luck with that.

The parallel financial dimension that Bitcoin lives in is the decentralized financial dimension.  Fiat money like the US dollar and the card schemes of VISA and Mastercard live in the centralized financial dimension.  The decentralized financial dimension is in its infancy though.  Bitcoin is just the very first building block of that dimension and is much more like gold than it is like the US dollar in today’s terms (because the US dollar and Fiat money in general are not backed by their underlying assets anymore and there is no limit to the supply).  In the early days, gold was also cumbersome for frequent transactions, and reserved for less frequent, larger, settlement type transactions.  Over the centuries, services were built on top the underlying asset of gold to make it more convenient and secure to use, like bank notes/cheques, credit, loans, exchanges, insurance, etc.

The recent surge in the value of Bitcoin (relative to the US dollar for example) can largely be attributed to the rise of the next set of building blocks in the Bitcoin timeline. Aptly name DeFi, for Decentralized Finance, these next set of building blocks make use of Smart Contracts (mostly Ethereum based) to build brand new financial services that are decentralized.  Ethereum and Smart Contracts are not new, it is just that the penny has dropped for using them to build financial services for this decentralized financial dimension (rather than all the other silly app ideas Ethereum has been used for in the past).  Ethereum combined with the use of overcollateralized stable coins (specifically DAI) to remove price volatility, makes it possible to build a fully fledged financial system that is decentralized - one that lives in parallel to the centralized financial system we have today.  Additionally, stable coins provide the bridge or connection point between the centralized and decentralized financial dimensions.

Take for example an Exchange like Binance or the NYSE.  These are centralized.  Ultimately, the small group of people or single person in charge of these organizations will make the final decision on how they work and who they will work with.  A Smart Contract can do exactly these same things, with the added benefit that it is immune to censorship.  This means that an entire Exchange can be completely deployed within the boundaries of a Smart Contract in this decentralized financial dimension and provide all the features of an Exchange in a completely autonomous and incorruptible manner.  Once the Smart Contract is deployed, that is how it will work forever (unless the consensus decides to hard fork of course, which is a much more democratic turn of events).

The first of these DeFi Exchanges, or DEXs, have seen immense adoption across the Crypto community and have given rise to the development and adoption of other decentralized services collectively referred to by the ghastly name of “Money Legos” (I mean, Lego is just way too sacred to allow the term to be claimed like that!). These “Money Legos” when combined are designed to provide complex services like lending and liquidity management for the decentralized financial dimension to name a few.  All the core building blocks that you need in a fully-fledged financial system.  It will not be long before you see the first completely decentralized bank using a combination of these “Money Legos” to offer its services to the market, except, it does not have a banking license issued by a central bank.  The bank itself will probably be funded by its own ICO, and it can be used as the foundation to build the user experiences that consumers and businesses in today’s centralized financial dimension have learnt to expect, and then outclass them completely.

Like the analogy with the car and the plane, in some cases it makes sense to use both at the appropriate time to get from A to B.  You might take the car to the airport, fly somewhere, and then take a car to your destination after you land.  I see a future where both the centralized and decentralized financial dimensions work together to provide a more stable financial system for the world.  We cannot deny how successful Bitcoin has been with the “gold use case” of the less frequent, larger, settlement type transactions with the likes of TransferWise for example.  They are a great early example of the centralized and decentralized financial dimensions working together with only the very first building block of the decentralized dimension. 

When I say, “It’s over for Bitcoin”, I mean the fight for proving the use case for Bitcoin is finally over, and we know undoubtedly that it is useful and here to stay.  We are on to the next thing now of building a decentralized financial system on top of it.  In the past 20 years we have seen the erosion of personal privacy, the near collapse of the financial system and an increase in censorship and control, all by centralized authorities.  Over the coming decade, the willingness for the world to fight back against that trend will tell how far down this decentralized rabbit hole we go.