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2019.04.29.

Trends in digital banking – Exclusive interview with eCommerce director at Citi

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Preparing for a real-time world, open banking regulation, cyber risk and fraud will be top challenges banks face in the next 1-3 years – according to Lola Adebanji, eCommerce director at Citi. She spoke about the trends in digital banking at the FinTechShow, Hungary last week. She gave FinTechZone readers an exclusive interview.

Lola Adebanji, Citi

She is responsible for eCommerce propositions for Citi’s Treasury and Trade business across Europe, Middle East and Africa. Her role involves working with eCommerce companies and Fintechs to support their global growth agenda. She also leads engagement with our clients on digital themes such as Open Banking, eCommerce trends and payments landscape developments.

1. What do you consider the major 3 trends in banking which have the greatest impact on Citi Global and specifically on corporate banking?

Lola Adebanji: A major trend in banking is the shift from batch to instant and around the clock processing. Bank connectivity is becoming real-time with APIs and real-time payment schemes are gaining momentum globally with over 30 markets live and many more markets – including Hungary – planning to launch schemes.

APIs will be the connectivity that underpins bank to corporate services in the future, as they enable real-time, on-demand, data exchange around the clock. APIs maximise the possibilities of new solutions that will help corporates reduce payment costs and receive information faster. Citi has a range of APIs available for corporate clients, and offers an API developer portal to make testing and onboarding of API services easier and faster.

Instant payments have historically centred on person-to-person payments; however, instant payments are gaining traction in corporate banking with compelling use cases. For example, instant payments, combined with APIs, are enabling digital marketplace companies – such as food delivery and ride hailing – to deliver a better payment experience to their partners, which in turn enhances their competitive advantage.

Additionally, Instant payment schemes in some markets are starting to evolve beyond payments to enable instant collections from bank accounts, also known as Request to Pay (RTP), to deliver secure and low cost alternative methods of payments for digital commerce.

Another major trend is the shift to open banking models, as we have seen with PSD2 in Europe. As digital commerce fuels growth in the digital payments space, regulators around the world are actively seeking to drive innovation by opening up access to bank and non-bank players, and putting consumers back in control of their data.

So far, a lot of focus has been given to the impact of Open Banking on retail banking, however we believe it holds transformational opportunities for corporate banking as well. Beyond Europe, regulators in other markets – such as Hong Kong, Japan, Canada, Australia, and Singapore – are starting to explore and develop Open Banking API frameworks.

A third trend in corporate banking is digital transformation at industry level with SWIFT’s global payment initiative (gpi). Since its launch 2 years ago, gpi is already dramatically improving the payment experience for banks’ customers by improving the speed, transparency and end-to- end tracking of cross border payments.

Gpi now accounts for over 50% of all SWIFT cross border payment traffic, with more than half of these gpi payments credited to the beneficiary in less than 30mins, many arriving in just seconds. Citi believes in the vision of gpi and the opportunities it can deliver to our clients, and hence we were one of the first banks to launch gpi capabilities. Universal implementation of gpi across the SWIFT network of 10,000+ banks is expected by 2020.

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Lola Adebanji, Citi @FinTechShow 2019 in Hungary

2. What do you think are the top 5 challenges banks face in the next 1-3 years?

Lola Adebanji: Some of the key challenges that banks face in the near term include:

Preparing for a real-time world: As digital commerce continues to grow, banks will need to digitise and transform their core infrastructure to compete in a world of real-time 24×7 commerce. This is fundamentally key for banks because the growth of digital commerce is not only from eCommerce companies, but also from traditional corporates that are evolving their business models to go online direct to consumers.

Additionally, APIs will be the connectivity that underpins how financial services are delivered in real-time into digital and eCommerce platforms and hence

banks must invest in the API economy to deliver banking as a service directly into these digital platforms, to avoid disintermediation from non-bank players.

Furthermore, banks will need to collaborate at industry level to develop API standards and avoid fragmentation as we saw back in the days of proprietary online banking portals. As an example, Citi is leading a cross industry initiative with SWIFT, banks and digital merchants to create a baseline Pay Later API standard that banks can leverage to deliver installment lending via API, directly into digital / eCommerce platforms.

Open banking regulations pose both an opportunity and a challenge for banks. Banks are still embattled with compliance while competition is intensifying in the open banking space. Banks will need to evolve quickly from compliance mode on Open Banking to innovate and deliver compelling services that create value for their customers, in order to compete with more agile and nimble non-bank players.

Cyber risk and fraud will continue to pose a challenge for banks and their customers. Banks will need to adopt a digital security framework that embodies technology and robust controls around people and processes. Banks should also actively collaborate with their clients to share best practices and provide guidance on threats.

Despite the above challenges, it’s not all gloom for banks. New technologies, such as AI and Machine Learning, can enable banks to digitise the core, enhance security and deploy new value-added solutions at lower cost. Forging the right FinTech partnerships can also enable banks to deliver new compelling solutions faster to their customers and accelerate growth.

3. Citi is proactively looking for fintech cooperations. Does Citi have a well thought Fintech partnership strategy? What is exactly what Citi is looking for?

Lola Adebanji: Citi’s engagement with the FinTech community is robust and cuts across many areas, including:

Investing in FinTechs via our Citi Ventures business. With a portfolio of 40+ investments so far, Citi Ventures invests in innovative start-ups that can bring solutions to augment and enhance Citi’s products and services, to help our clients thrive in a world of change.

Partnering with FinTechs to embed their services into Citi Solutions to create significantly enhanced value propositions for our clients. An example of this is our partnership with FinTech company, HighRadius, to launch our Citi Smart Match solution. The solution leverages HighRadius’ artificial intelligence (AI) and machine learning (ML) technology along with Citi’s own assets to dramatically optimise the cash application process of matching open invoices to payments for our corporate clients. The partnership follows a strategic investment made by Citi Ventures in HighRadius in 2018.

Engaging FinTechs as clients, by connecting Citi’s global network and solutions with FinTechs that fall within our target market, to help them grow and go global.

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Lola Adebanji, Citi @FinTechShow 2019 in Hungary

4. Open Banking is a new service provisioning approach, a new way of using data. What does – in your view – open banking mean to Citi? What is there to achieve with being proactive in open banking?

Lola Adebanji: Open Banking puts the customer back in control of their data and compels banks and third party providers to innovate and build services that their customers perceive to be of value.

The Open Banking opportunities in the retail banking space are well publicized, however Citi sees Open Banking as a significant development that can also create the rails for new and re- imagined payment services for our institutional clients. As an example, Citi has recently concluded a Proof of Concept (PoC) in the UK, to test instant collections from bank accounts via open banking, as an alternative payment method for eCommerce merchants and other digital platforms. This is one of many compelling services that can be delivered on Open Banking API rails.

Citi’s leading role in Open Banking developments is further underscored by being the first corporate bank to register with the UK Open Banking Implementation Authority as a Payment Initiation Service Provider (PISP).

In terms of when to engage in Open Banking, proactivity is key because the competitive landscape between banks and non-banks will change rapidly as Open Banking gains traction.

Banks need to treat Open Banking not purely as a compliance project but to have a strategic response to counter the threat of disintermediation from the customer relationship.

Proactivity also means having a robust API strategy for open banking – leveraging API standards as much as possible and creating API enabled services that deliver value to customers beyond the minimum prescribed by the regulation.

5. Open banking (PSD2 in Europe), the API economy and instant payment are the 3 major drivers to create ecosystems of digital services around the consumers. What do you think the major challenges and business opportunities are of such ecosystems. Is there any recipe yet? Or we must yet to wait for it.

Lola Adebanji: Indeed, we are seeing a global shift in commerce to digital ecosystems, with companies creating platforms where users can enjoy an end-to-end experience for a wide range of products and services without leaving the ecosystem. Financial services, such as payments and lending, are being unbundled and delivered into these digital ecosystems via APIs.

Today, these payments and lending services are predominantly being delivered by the platform itself (e.g. Ant Financial Services powering the Alibaba ecosystem, Amazon Payment Services powering the Amazon ecosystem) and FinTech providers.

With the growing adoption of APIs in banking and rollout of instant payments and collection schemes,

banks have an opportunity to play a more significant role to deliver payments, lending and other services directly into these digital ecosystems.

On the Open Banking front, there are some key challenges that as an industry we need to continue to work on amongst banks, fintechs and with regulators to get us on a path to largescale adoption by consumers and digital ecosystems. We need to continue to solve for frictionless customer authentication, standardisation of Open Banking APIs, high API uptimes and 24×7 reachability of banks, optimising services for mobile commerce, etc.

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Lola Adebanji, Citi @FinTechShow 2019 in Hungary

6. What does digital banking mean to Citi today and what is on the roadmap? What is the next level of digital banking?

Lola Adebanji: Citi’s mission is to enable growth and economic progress, and digital transformation is core to delivering on this mission.

Within the transaction banking business, digital banking for us means delivering simple intuitive solutions that facilitate global and real-time commerce for our clients, and built on the rails of consistent digital capabilities to enable our clients to succeed in the digital age.

The next level of digital banking will see a vast array of financial services become increasingly embedded into digital ecosystems.

Many countries across the globe are in the process of building real-time payment systems for payments and/or collections, and regulators are driving Open Banking models that force banks to deploy APIs for both retail and wholesale banking. These developments are creating the rails for new payment models that connect digital wallets in real-time to bank accounts and can deliver bank lending directly into these digital ecosystems.

Additionally, next gen technologies such as Artificial Intelligence, Big Data and Machine Learning are becoming more mainstream in wholesale banking and are enabling banks to deliver enhanced digital banking services to clients around real-time analytics and risk management e.g. real-time payment fraud analytics.

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