Executive Summary

Fintech innovation continues to transform all kinds of business sectors, from banking and lending to travel and retail, to hospitality and even app-based food delivery. New convenient ways of completing and managing financial transactions are geared both to creating efficiencies, and to delivering fresher and more embedded and seamless financial experiences, which boost customer loyalty - and customer value.

Challenger banks and fintech startups typically have an advantage over established banks and building societies, being less encumbered by convoluted processes and complex legacy IT estates. This means they can move more freely in creating the kinds of experiences customers want, keeping pace as their needs and expectations evolve.

But even young and dynamic financial service (FS) innovators can come up against hurdles as they strive to offer customers more. For organisations without banking or payment licences, some element of partnership will always be required. And there is always a trade-off between doing one thing very well and trying to satisfy multiple customer needs. 

Up to now, banks have retained customers by being the safe all-rounders, while challenger providers have filled the gaps in great customer experiences – making particularly cumbersome transactions lighter and more accessible, for instance. To keep offerings feeling enticing and invaluable, digital-first financial providers need to be able to continue thinking outside of the box and bringing new functions and features online. 

But how well does their set-up allow for that, without costly additional development or a reworking of current software? New payment-related experiences might include new anti-fraud payee confirmation during outbound payments; integrated payment initiation services within a single app; and immediate payment reconciliations and refreshed account balances at whatever time of the day or week. But how easy is it to incorporate these kinds of features, let alone do so in a way that’s superior to potential rivals?

There is a further challenge facing non-bank innovators, too, and that’s how to monetise their services. Having won over banking customers with their more competitive rates (made possible thanks to lower operational overheads), and/or a better or more tailored range of account management features, the new breed of app developers/embedded financial service providers must find ways to turn those customers into profitable revenue streams.

If the digital innovator sits outside of the financial world, and is coming at financial services as part of a broader brand experience (retail, hospitality, employments services, travel), the goal might be to offer a branded account or dedicated spending card. This creates scope to increase customer ‘stickiness’ by making it easier for those customers to view, monitor and manage a particular type of spending all in one place, while the business can reduce costs by owning the financial operations - rather than reselling third-party solutions. 

But how can they connect in these kinds of capabilities, especially if they have cumbersome legacy IT systems (which is likely to be the case for a well-established organisation)?

Even with the most complex internal systems and processes to work around, there are tools that established brands can draw on today to deliver the new experiences customers expect. By harnessing these capabilities, all kinds of FS-linked service providers can innovate and grow their income, just by making it easier for customers to achieve what they need to. 


Drawing on the latest best practice of digital FS innovation leaders, and first-hand insights into what’s possible, this second eBook in our series distils some invaluable recommendations to help fast-track new customer innovation for those organisations coming at the opportunity from a non-bank background. 

We’d like to thank the interviewees for their time and comments.

Key issues 1 – Legacy technology 

A company’s current IT set-up will always have a bearing on its ability to innovate and move nimbly. In the financial services industry, although traditional banks and building societies may face the biggest challenges in this regard, many challengers and brands external to the sector (those seeking to extend their offering with streamlined/ own-branded payment services) are likely to face their own practical hurdles. 

Even startup and scale-up companies may struggle to bring new features and services online, because of the closed or one-track approach they have taken to IT up to now. To move lightly, and maximise efficiency and profitability from any next moves, they may need to rethink the way they connect in new capabilities and operate them in a sustainable yet scalable way.

Strategically, the goal is to build and increase customer attraction, loyalty and profitability, without substantially increasing operational costs. This will have a bearing on how the company approaches the creation and delivery of new functions and features.

Take payment processing – a popular target for service innovation, as app-led industry disruptors show the market what more instant and traceable payments could look like. Delivering innovation in this area requires round-the-clock, real-time payment processing and account balancing. 

The experiences of Curve illustrate the burden of legacy technology along the established FS supply chain, even though the company itself started as a green-field business just a few years ago.

Curve provides a payment card that aggregates multiple payment means through its accompanying mobile app, allowing a user to make payments and withdrawals from a single card. (It lets the user switch the bank card they paid with once a transaction is complete.)

“We are a platform and we link into banking infrastructure,” explains Nathalie Oestmann, Curve’s Chief Operating Officer. Our solution adds tangible value for our customers, but when we’re integrating with a bank - or if I'm integrating with Open Banking - then we hit legacy infrastructure and that does slow us down a bit. Our technology addresses this, but it is an issue we come up against.”

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