The "digital disrupters" reinventing the way we bank

David Lee discovers how one financial services pioneer has fully embraced technology and is helping both smaller firms get to market and the banks' huge digital transformation

Sopra Steria has a proud financial services heritage stretching back 50 years – but the company knows that being relevant in the digital world of 2018 is what really matters.

Today’s banks, building societies, insurance companies, asset managers and investment organisations are being challenged to develop new, intuitive and engaging customer services in order to stay relevant and competitive. And fintech is how they will do it.

Colin Carmichael, UK fintech director for Sopra Steria, says we are in exciting times. As a Scot, he is delighted that Scotland – where the company employs 400 people – is at the heart of the fintech revolution.

“Sopra Steria Group is one of the best-known fintech organisations in the UK and I am delighted to be involved in the fintech journey in Scotland from the start through our relationship with Scottish Financial Enterprise (SFE),” says Carmichael.

Working with Scottish Enterprise, SFE was charged with raising the profile of fintech across Scotland and, therefore, set up FinTech Scotland to focus activities.

“Sopra Steria is delighted to be the technology partner of FinTech Scotland. It’s been an incredible journey watching fintech develop from a standstill position to being around us everywhere.

“We regularly run round-tables on how fintech is disrupting the market as it allows us to see where the real opportunities are.

“This enables us to drive our own investments and create relevant service offerings for our customers.”

Jerry Mulle, proposition development director of its banking software subsidiary, Sopra Banking Software, says: “There is a real movement in the market that all financial services companies are waking up to.

“The challenger banks have been a major factor in making the big banks look at their propositions and seek to digitise what they are doing. Some thought they could build everything themselves, but with open banking and the rise of the challengers, there is a scramble to remain relevant by working with best-in-breed providers to deliver truly engaging services.”

More than 30 lenders (around 25-30 per cent of UK mortgages) use Sopra Banking Software’s mortgage (MSS) software and that is attracting young fintechs. Why? “It can take a start-up 12 to 18 months to get to market and they often quickly run out of money,” says Carmichael.

“But it’s not just the fintechs; big banks often find new products hard to integrate into legacy systems.

“At Sopra Steria, we can work at that interface – helping smaller companies get to market and assisting the banks with the huge digital evolution and incorporating new, exciting fintech into their products.”

Mulle adds: “We feel a lot of big banks’ back offices are not fit for purpose in the modern digital age, so we’ve come up with solutions that deliver rapid impact.

“Using our range of modular digital solutions, our business accelerators and, our API [application programming interface] gateway, we are able to implement easy access into the back office, as well as the ability to rapidly deploy new functionality.

“If a bank wants to launch a new mortgage product, for example, it needs to be fast and responsive.

“It needs to isolate the back office and let it get on with doing what it’s designed to do – processing millions of transactions every day.

“So the next step is to integrate the digital platform with the fintechs and enable banks to take maximum advantage of the exciting innovations.”

Mulle says a further challenge for established financial institutions is the move beyond simple omni-channel to a position where a customer can move sequentially from channel to channel at will.

New channels like digital personal assistants have resulted in changing consumer habits and the need to move between multiple channels, potentially as part of a single online experience.

“Customers want the same quality experience whatever channel they are using.”

That means “freeing up the back office” for large financial services institutions – replacing or enhancing old legacy platforms to make behind-the-scenes operations run smoothly.

Sopra Steria’s approach to solving the legacy problem is to show customers that its consultancy approach combined with its software and extensive range of services can accelerate the speed of change and deliver new, digital ways of working .

For financial services organisations, its integration modules offer a seamless, best-in-breed transformation and enables established organisations and fintechs to work together collaboratively to take innovations to market.

Carmichael says London is the top hub for fintech in the UK but Scotland’s investment is allowing it to catch up rapidly.

He has been pushing the fintech agenda relentlessly for 18 months and was delighted when Sopra Steria was appointed as the strategic technology partner for FinTech Scotland this month, putting Carmichael and his Edinburgh-based team at the centre of all fintech activity across Scotland.

“This includes working with FinTech Scotland to create a ‘virtual factory’, a platform that allows incumbent firms and fintech companies to collaborate in a safe harbour to create innovative solutions. It’s also about showing internationally what assets are available through Scottish-based organisations and which might be helpful to support the growth of their business.

“Put simply, it’s about bringing together a range of resources into a ‘one-stop shop’.

“The financial services sector in Scotland has incredible opportunities for fintechs to access innovation labs, open APIs and sandboxes and we want to showcase those assets and make it easy to access them via the virtual factory.

“FinTech Scotland will look to connect established organisations and fintechs to develop and deliver strategic priorities, ensuring fintechs focus on what today’s market needs right now.

“It’s also all about that interface between large financial services businesses and small, agile fintechs and how we can help them to help each other.

Carmichael thinks the fintech ecosystem in Scotland is in good shape: “It is small but growing rapidly and we are making remarkable progress.

“It’s great to have Stephen Ingledew at FinTech Scotland bringing everyone together with a unified message.

“Becoming a top five hub is ambitious but most definitely achievable. Through data and tech, Scotland is getting its swagger back again.

“Data underpins everything and Scotland has an ambition to create 12,000 new data science jobs.

“We can do it; the Edinburgh School of Informatics is the best in the UK and number three globally and we have many leading universities that are spearheading technology innovation. The analysis and insights we create can be really helpful to fintech businesses.”

Carmichael names Castlight Financial as one of the Scottish fintechs doing brilliant things with data: “They are using big data as well as open banking to allow safer and more informed decision-making as regards who should access financial products and we should be very proud of them.

“We also have Wallet Services, who are doing really interesting work in the government sector, delivering innovative blockchain offerings which are also transferable to financial services.”

So why should exciting young fintechs in Scotland, as well as throughout the UK, look to work with Sopra Steria?

“We are plugged into over 850 businesses globally and that’s a big market for them to tap into.

“We have a great software platform and extensive consulting services which we can integrate them to work with customers. Put simply, we can accelerate their route to market.”

That customer relationship has to be based on trust and security, says Mulle: “Sopra Steria has managed its customers’ security and data for a very long time.

“We have developed high degrees of trust, but we have to work hard constantly to maintain that trust.

“For fintechs and the financial services industry, there is a huge opportunity with open banking.

“This looks set to revolutionise the market by opening up the way people bank and look after their money.

“However, it’s only an opportunity if financial organisations maintain the trust customers have invested in them in the past.

“Delivering new innovation is essential to growth and ongoing success but doing it safely and securely is paramount.

“So, as we build a fintech ecosystem in Scotland, trust has to be at the heart of that.

“Larger financial brands are now seeing the importance of this, which is why they are embracing open banking more positively than previously.”

Mulle admits there is a job to do to help the wider public understand what open banking is all about.

“In a survey last year, only 20 per cent of people had heard about it.

“That means it is incumbent on the whole industry to explain what it is and how it works.

“When you stick your toe in, you can see the benefits of the extra data, analysis and opportunities open banking provides.

“But it has to be explained clearly and concisely and, unfortunately, the financial services sector hasn’t done that well.

“Some people see it as complex and dangerous and something to be feared, whereas it actually offers huge advantages and can be quite simple to implement.

“Thirty years ago, I was an assistant bank manager and when you met a customer, you asked them a few simple questions about their financial circumstances and personal data.

“There is now lots more data available but it is not necessarily used in your day-to-day digital relationship with your bank. Open banking should change that.”

Carmichael adds: “Fintech start-ups with good ideas have access to a lot more data through open banking and PSD2 [the Revised Payment Service Directive].

“The agenda will be driven by consumers and we all need to be agile because it is impossible to predict what is around the corner.”

For more information about Sopra Steria, visit their website