During this year’s Fintech Week London event, Payment Expert spoke to Paula Costea, VP of Product Management at FintechOS to discuss how the firm is supporting banks and other financial institutions to modernise their capabilities as they evolve from legacy systems.
Payment Expert: Firstly Paula, you spoke on a panel during Fintech Week London, what were some of your key takeaways from that discussion?
Paula Costea: The panel mainly tackled the challenges and opportunities that embedded finance brings for financial institutions and especially, incumbent banks. There were opinions from a lack of knowledge in cross-domains of financial institutions, to whether it is time for collaboration/competition and the use cases in the banking industry and outside.
Distributors, companies that own the customer relationship and engagement, are the ones that I believe really drive the trends in embedded finance. You can see retailers, e-commerce players and other businesses that are driving use cases for embedded finance.
Technology is just an enabler, it’s just a matter of when the financial institutions start working with the market, even with their own customers, to understand what the best products are that suit their needs.
But embedded finance is not just about payments or Buy Now, Pay Later, it can expand to consumer and business lending, savings or other products and achieve profitability in the end.
PE: FintechOS recently announced a 70% annual revenue growth, congratulations, what do you attribute to that successful growth?
PC: FintechOS’ growth is fuelled by launching new products to market and modernising their core servicing solutions with five banks in North America in 2022; overall revenue growth of 70% YOY; 300% YOY insurance revenue growth.
We see a lot of projects coming up from incumbent players that are looking to modernise their legacy systems so they can launch new products faster and cheaper to market at their own pace.
It’s not replacing their core or legacy systems. It’s really building alongside whilst lowering the costs, while still leveraging new technologies and creating new products and distributing them through new channels. At the same time, enabling collaboration between new parties in the ecosystem.
We are working with incumbent players that have launched new SME lending products into the market. We’ve also had interesting opportunities and projects that we’ve delivered in digitising mortgages, so there is a lot of investment still in the market.
PE: Have you seen a greater demand from legacy banks to modernise and digitise their systems?
PC: I think that has been a constant investment over the last several years. But just from the initial use cases around digitising the way customers open a current account or apply for consumer loans, we see banks modernising more complex products.
On one side mortgage and SME lending, and on the other side, tapping into embedded finance and launching new channels that are not necessarily owned by them.
Not only banks but other players as well, such as payment processors, telcos or new fintechs, are entering the market and looking to finance their own offerings and create more value for the end consumer.
PE: Can you speak on your recent partnership with PwC and the digital banking solution
PC: PwC is looking at how it can design a digital bank that can leverage the best technologies available so banks can accelerate launching new products to market, and look at the full length of digital banking propositions.
We are rolling out interesting projects across the UK and Western Europe with PwC, where companies and other financial institutions can begin to digitise their businesses. Most of them line-by-line, starting from the product catalogue to the digital channels and then even to servicing new product and offer types, such as BNPL.
Even insurance, so how large banks and financial groups have multiple lines of business and how they can cross-leverage their expertise into one bundle product.
PE: How successful has FintechOS’ BNPL offering been since launching over a year ago?
PC: You can launch the product through APIs, integrating it into different channels from different partners, and at the same time, you can also service it.
We have had successful implementations with a lot of e-commerce platforms joint-venture with the payment processors in both SEE and Western Europe, or even credit institutions and banks tapping into this area, who managed to launch the product in four-and-a-half months and have been very successful and are also looking to expand their offering into fully regulated lending.
This means that they are looking to leverage the current system but also tapping into different e-commerce players and accessing different markets, while also diversifying their financial products portfolio for new revenue streams.
PE: How pivotal will regulation of the BNPL space prove to be?
PC: I think regulation has kicked into most of the markets and it will become stronger after the success BNPL has had over the last few years.
I think it is important to realise the risk for the end consumer because in the end, the role of the financial institution is to protect the consumer. Regulating it does not mean it will disappear, but it will change the landscape.
I think the only challenge that would remain is the way consumers are applying for BNPL. They require a seamless experience. Once regulated, providers must apply the type of risk assessment that is complex and makes completing the application take longer and a more cumbersome journey.
The key will be constantly looking into automating the journey by leveraging data. As I was referring to earlier, you can always use more data to expand and modernise the operating risk models that are traditional and in use today. It is an opportunity to leverage new partnerships with the players in the ecosystem to identify new data sets.
In terms of authentication, embedded finance providers have already adopted eIDV solutions to simplify customer identification. I believe that is already there when offering lending products by integrating the banking products.
Merchants are pressured to have a Click to Pay type of experience which needs a full risk assessment but it is streamlined and fully automatic for the customer.
PE: Lastly Paula, what do FintechOS have in line for the rest of the year?
PC: We are committed to helping our customers roll out new products and offerings to the market, and continuing the transformation with the ones who have been doing this for years and who are now tapping into the more complex use cases like mortgages or SME lending. We have multiple projects with customers who are modernising their legacy core infrastructure with FintechOS.
We are looking at expanding in North America. We have some interesting use cases and projects in the embedded finance space actually, such as banks providing loans to acquire tractors or to cover clinical health care payments in the US, making them available as an offer in the clinic.
Moreover, we are going to have a major product release in November reinventing and simplifying the way product owners create personalised products and bundles leveraging data and much more.
