Whilst Neobanks have undoubtedly forced incumbents to raise their digital game, it’s crucial they take that to the next level to accelerate the widely anticipated evolution of the banking industry.
Raman Korneu, CEO and Co-Founder of myTU, spoke to Payment Expert on the company’s transformation, the importance of moving its tech stack in-house, and reminding neobanks of the vital role they play in innovating the fintech space.
Payment Expert: Firstly Raman, what was the reasoning behind myTU’s birth into the market?
Raman Korneu: Our initial focus was on serving the travel industry – and our original name, “myTravelUnion”, reflected that vision. Our team saw a major opportunity to provide financing solutions to travel companies and digital nomads, who were being badly let down by traditional banks.
Both groups have unique cash flow challenges. They have to outlay large sums of money, usually in advance of payments from customers, in the case of business users, or actual travel or use of a rental property in the case of digital nomads.
However, conventional banks are notorious for having rigid rules that make life difficult for anyone or any small business that does not fit a simplistic profile. We identified it as a gap and launched, successfully, into that niche – unfortunately, not that far ahead of the outbreak of the COVID pandemic.
PE: What are some of the biggest payment challenges in the travel sector, and how is/has myTU helped to remedy this?
RK: The travel sector faces unique payment challenges. One is the issue of handling and tracking customers’ deposits, maybe a year ahead of travel. Another is the availability of enough working capital to get the best locations and prices. That involves booking in bulk and well ahead of receiving final payments from customers.
From a digital nomads point of view, there can be cash flow issues as well. Landlords usually want large deposits, even for relatively short stays, and regular moves incur repeated peaks of expenditure on household items as the nomad moves into a new property.
And for both groups’ payments tend to be cross-border, where the legacy banks can have extremely clunky and expensive offerings.
PE: What caused the shift from myTU from focusing on the travel and hospitality sector to more family banking-orientated solutions?
RK: As COVID decimated the travel industry, we were forced to swiftly pivot our strategy. We shifted to family banking, which proved to be an excellent way to acquire customers. By offering parent-controlled accounts for children, we signed up entire families as customers at a much lower customer acquisition cost than is possible in most other sectors.
We weren’t unique in having to pivot, but 2020-21 definitely demonstrated our agility amid adversity.
Though we changed course, travel remains important to our heritage and future plans. As travel recovers, we hope our family-centred approach has built a loyal customer base.
RK: Can you talk on the importance and benefits of shifting myTU’s tech stack in-house and do you believe this should be industry standard across the board?
Yes, I strongly believe that managing core infrastructure internally is crucial. That’s not a mainstream view – yet. Many people in fintech still prefer modular third-party systems. However, the realisation is dawning on the industry that relying on external platforms means less control and ability to innovate.
On the surface, neobanks appear radically innovative with slick apps, social branding and lots more besides. However, core banking operations like lending and payments remain worryingly similar to those of other neobanks, and maybe even to legacy banks – which is the final insult. That’s because they are building on embedded fintech apps from third party vendors.
Don’t get me wrong: Neobanks have definitely forced incumbents to up their digital game. But technology has rarely been the true barrier for banks. Ultimately, neobanks need to deliver on the promise of fundamentally reimagining banking. A cool UX is just the first step. A platform that enables genuine difference will increasingly be essential and that’s why we made the decision to avoid third party.
The large neobanks too are gradually coming to this understanding. For example, I was not at all surprised by the recent news that Monese is parting ways with their provider Thought Machine, implementing new core tech developed in-house by their own recently launched fintech subsidiary XYB.
However, the migration from one core to another is a serious problem for a bank, it takes a lot of time and money. So let’s see where they get with this.
PE: Finally, and thank you for your time, how do you envisage AI playing an integral role throughout the rest of this year and next year in the fintech/neobanking space?
RK: Looking ahead, I expect AI to play an enormous role in automation, personalization, fraud prevention, and regulatory compliance. For instance, myTU uses AI to review customer due diligence materials in seconds rather than several hours with manual review processes.
By building on Google Cloud, myTU has ensured it has access to the very latest AI tools and libraries, and that those resources are built within secure and ethical parameters. By choosing the public cloud via Google Cloud, we have ensured access to the latest in AI and the ability to remain relevant and evergreen for users.
Applying AI strategically unlocks immense potential. However, neobanks have to ensure transparency and ethical use. Overall, AI will be integral to delivering efficient, seamless financial services.