BANKING + FINTECH: A COLLABORATION FOR GROWTH

ISSUEISSUE
253//255//
DECEMBER 2017
APRIL 2018

Banking+Fintech:
A
A Collaboration
in collaboration with
for Growth
© 2018 Digital Banking Report. All rights reserved. PA G E 1
 BANKING AND FINTECH

In the future, we will see more banks and fintech firms working
together on innovation projects. Legacy organizations are finally
warming up to the idea that they don’t have to invent everything
in house, and that the network effect can be very valuable
for digitally-based financial innovation projects. Professionally
managed consortia will allow more institutions to make up lost
ground on the innovation leaders.
— JP Nicols
Managing Director
Fintech Forge

Copyright 2018: DIGITAL BANKING REPORT (ISSN 2375-3455)

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 BANKING + FINTECH: A COLLABORATION FOR GROWTH

Contents
Letter from the Publisher | 4 |
Summary of Marketplace Examples | 6 |
Executive Summary | 10 |

The Evolving Bank Ecosystem | 19 |

Rationale for Banks + Fintech | 31 |
Banks + Fintech by the Numbers | 40 |
Successful Fintech Strategy Components | 50 |
Marketplace Examples | 62 |
Conclusion: The Future of Platformification | 70 |
About the Author | 74 |

© 2018 Digital Banking Report. All rights reserved. PA G E 3


DIGITAL BANKING REPORT
Jim Marous, Owner and Publisher
jmarous@digitalbankingreport.com
8803 Brecksville Rd.,
STE 7-223, Brecksville, OH 44141
(216) 218-4257
Issue 255 Cost $495
SUBSCRIPTIONS: $1,995 per year
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WARNING: Federal copyright law prohib-
its copying or distributing this report in
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for reprints.
BANKING + FINTECH: A COLLABORATION FOR GROWTH
Letter from the Publisher
The vast majority of legacy banking organi-
zations have a concern regarding the loss of
revenue to financial technology companies in
areas such as payments, money transfers and
personal loans. The amount of business at risk
has been estimated to be as high as 25% in
lost revenues. This is made more likely since
30% of consumers plan to increase their usage
of nontraditional financial service providers in
the future.
In response to this threat, more than 8 in 10
traditional financial organizations have stated
a plan to increase collaboration with fintech
companies in the next three to five years. Simi-
larly, almost half of financial services firms are
planning to acquire fintech startups over the
same period.
The rationale for collaboration is clear. Fintech
startups realize that it takes more than a great
solution to attract a scalable customer base.
To reach beyond early adopters and the tech-
savvy takes massive amounts of capital for
promotion and product support.
Alternatively, legacy banking organizations
struggle to keep up with consumer expecta-
tions. Organizational size and structure (silos)
and even traditional leadership styles hamper
the ability to deliver the new digital solutions
consumers receive from other industries.
Partnering with a fintech startup alleviates
some of these issues, allowing the established
© 2018 Digital Banking Report. All rights reserved.
organization an opportunity to keep pace with
marketplace demands.
The question is whether these new
partnerships can successfully preserve
the culture of the fintech provider, while
allowing legacy banks to be the hub of the
consumer’s financial relationship? This
report is not intended to provide a review
of all of the fintech organizations in the
marketplace. Instead, this report is a view of
the quickly changing banking ecosystem.
We would like to thank Microsoft for their
partnership and sponsoring the Banking +
Fintech research report in collaboration with
Efma. Their partnership has enabled us to
create an in-depth review of the competitive
landscape and to better understand the
impact across all components of the financial
services ecosystem.
Going forward, fintech firms and legacy
banking organizations can both benefit. The
combination of digital product design and
innovation with vast distribution and estab-
lished infrastructure is compelling. Most
importantly, the consumer stands to benefit
most of all in the future.
Enjoy!
Jim Marous
Publisher, Digital Banking Report
PA G E 4
 BANKING AND FINTECH
DIGITAL PAYMENTS AND MOBILE WALLETS

ISSUE 252// NOVEMBER 2017

ISSUE 249// JUNE 2017

ISSUE 256// APRIL 2018

Digital
Payments
aym
y and
ISSUE
ISSUE253//
254//DECEMBER
FEBRUARY 2018
2017
obi
bi Wallets
Mobile
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UPCOMING ISSUES
BANKING + FINTECH: A COLLABORATION FOR GROWTH

ISSUEISSUE
253//255//
DECEMBER 2017
APRIL 2018

Q 2018 Financial Marketing Trends

Q  The Power of Personalization in Banking
Q  Digital Customer Acquisition & Engagement
Q  10th Annual Innovation in Retail Banking
Banking+Fintech:
A Collaboration digitalbankingreport.com/subscribe
for Growth
PA G E 5
in collaboration with
© 2018 Digital Banking Report. All rights reserved. PAGE 1
 BANKING + FINTECH: A COLLABORATION FOR GROWTH

Summary of Marketplace Examples

The following is a list of marketplace examples that are described near the end of this report. Some of
them are compliments of the Efma Accenture Distribution & Marketing Innovation Portal.

Institution Product Banks + Fintech Innovation

TD Bank (Canada) MySpend A collaboration between TD Bank and Moven to

develop a next-generation mobile expense tracking
app. The result of this partnership was MySpend,
a mobile, real-time expense tracking and money
management app, made available to TD’s Canadi-
an customer base.

Bradesco (Brazil) Field Control Field Control is an online interaction between

service providers and internal customers of the
organization (Bradesco’s branches and depart-
ments) delivering information about real-time
services and reports per type of service, company
or region.

Isbank (Turkey) Charity Box A fintech innovation that provides a chance to

donate spare change to the charity of the card
holders’ choice with every Isbank debit/credit
card purchase.

Israel Discount Bank Open API The first open API banking platform implementation
(Israel) Platform in Israel – a collaboration between IDB and
iCount (a leading SME on-line accounting and
management system) that provides SME’s with the
‘big guys’ management tools.

Akbank (Turkey) Salary Payment Akbank aimed to provide SME customers solutions
Integration open for their daily operations to help them increase
APIs their efficiency. Akbank built partnerships and
integrations with fintech firms and start-ups which
offered value-added digital solutions focusing on
SMEs pain points.

Van Lanschot Microsoft Azure Mobile-first, web-based client platform to access

a variety of data and services from across Van
Lanschot’s offerings, including transaction and account
overviews, personal data, asset management insights,
direct communications with bankers, and more.

Goldman Sachs Marcus Marcus by Goldman Sachs is only 2 years old, but
(United States) is already showing the potential of a strong Banks
+ Fintech strategy. Using open banking APIs and
aggressive acquisition of fintech start-ups, they
are becoming a larger player for deposits and
loans without opening a branch.

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 BANKING + FINTECH: A COLLABORATION FOR GROWTH

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Partnering to Build a Powerful
P2P Solution
More than 2.7 million Nor wegians
pay for just about anything with the
Vipps mobile payment app. In fact,
they don’t just send you money in
Nor way anymore; now they Vippse
it to you.
With that kind of success, the
company—also called Vipps—had
to be ready to scale and innovate,
so it uses Microsoft Azure to power
and scale its
app into a
globally com-
petitive offer-
ing. With
Azure, Vipps
can scale
for success,
innovation,
and value,
while it
transforms payments in Nor way.
“We think mobile payment
will be the new normal in
Norway within one or two
years. Azure is helping us
make it possible.”
Rune Garborg
Chief Executive Officer
Vipps
People everywhere have to pay for
just about everything. They order
things online, make purchases in
stores, and split up lunch checks
with friends. They move all that mon-
ey around in any number of ways.
Six of ever y ten Nor wegians Vippse
– more than 400,000 times on
an average day. Vipps holds 98%
brand awareness in Nor way, and
almost ever y bank in the countr y
supports the app. And, Vipps only
launched in mid-2015.
© 2018 Digital Banking Report. All rights reserved.
BANKING + FINTECH: A COLLABORATION FOR GROWTH
A Strong Partnership and
Accelerated Innovation
The Vipps app was originally devel-
oped and launched by DNB, one
of the leading savings banks in
Nor way. DNB initially ran Vipps with
a monolithic architecture in its own
on-premises infrastructure.
By the end of 2015, the app had
more than a million users, and by
2017, it had left all its regional com-
petitors far behind. To keep pace
with its own success – and compete
with global mobile-payment players
– DNB partnered with 106 other
Norwegian banks to launch Vipps
as an independent enterprise. The
new company immediately began to
rebuild the Vipps mobile app for a
micro service-based cloud architec-
ture using Azure.
“We turned to Azure to scale Vipps
for users and transactions, ac-
celerate innovation, and expand
our product,” says Thomas Wold
Johansen, Chief Technology Officer
at Vipps.
An Advanced Cloud Platform
and New Customer Services
Vipps initially migrated its
application infrastructure directly
to virtual machines in Azure. To
upgrade its data structure and get
the most out of Azure ser vices, it
also migrated from Oracle to Azure
SQL Database It then began using
Azure API Management to publish
Vipps microser vices to internal
developers along with partners and
merchants.
“It was essential for us to main-
tain business momentum while we
scaled up,” says Johansen. “We
were able to do both by working
with the expert Microsoft cloud
team in Nor way and the mature,
flexible, and power ful Azure plat-
form.”
The company uses Azure
Notification Hubs for push alerts,
Azure Cosmos DB to support Vipps
chat, and Azure Active Directory for
authentication and access control.
By November 2017, the company
hosted all core Vipps ser vices on
DC/OS clusters in Azure Container
Service.
Consumers expect free peer-to-peer
(p2p) payment, so to drive revenue,
Vipps is using Azure to help launch
new paid services for merchants
and e-commerce vendors, such as
bank-agnostic instant payment,
online payment, account payment,
Vipps invoice service, and reporting
tools based on Microsoft Power BI.
“Last year, Vipps p2p transactions
increased 75%, but paid transac-
tions grew more than 300%,” says
Johansen. “As merchants continue
to see more sales with Vipps, we
will use Azure and Power BI ana-
lytics and reporting to help them
generate more business insights.”
Scale, Success, Innovation,
and Value
By using Azure, Vipps has struc-
tured its mobile app to accom-
modate its expected growth. It’s
building a digitally native company
positioned to compete and win on a
global scale. Vipps developers can
PA G E 8

easily build and share new APIs
and get new ser vices to merchants
and consumers quickly. With unlim-
ited scalability and a global Azure
presence, Vipps can meet almost
any demand—in Nor way or any-
where else.
“With Azure, we can scale Vipps as
it grows and streamline future de-
velopment, upgrades, and innova-
tion,” says Johansen. “That allows
us to focus less on operations and
more on building new ser vices,
creating value, and competing
effectively.”
A New Verb, for a New Way to
Pay
With the power of the cloud, Vipps
might just replace credit cards,
debit cards, and cash in Nor way.
Already, Nor wegian diners can
Vippse their order, eat, pay, and
get a digital receipt—without ever
bothering a waiter.
Team Nor way fans can Vippse their
hockey tickets instantly. Shoppers
© 2018 Digital Banking Report. All rights reserved.
BANKING + FINTECH: A COLLABORATION FOR GROWTH
at pop-up stores can Vippse if they
don’t have cash, and if Nor wegian
online shoppers don’t like card
numbers, expiration dates, or se-
curity codes, they can Vippse their
purchases instead.
“We think mobile payment will be
the new normal in Nor way with-
in one or two years,” says Rune
Garborg, Chief Executive Officer at
Vipps. “Azure is helping us make it
possible.”
“It was essential for us to
maintain business momentum
while we scaled up. We were
able to do both by working
with the expert Microsoft
cloud team in Norway and the
mature, flexible, and powerful
Azure platform.”
Thomas Wold Johansen
Chief Technology Officer
Vipps
PA G E 9
 BANKING + FINTECH: A COLLABORATION FOR GROWTH

About the Author

Named as one of the most influential people in banking and
a ‘Top 5 Fintech Influencer to Follow’, Jim Marous is an
internationally recognized financial industry strategist, co-pub-
lisher of The Financial Brand and the owner and publisher of
the Digital Banking Report. The Digital Banking Report is a
subscription-based publication that provides deep insights into
the digitization of banking, with over 175 reports in the digital
archive available to subscribers.

As a sought-after keynote speaker, author and recognized authority on disruption

in the financial services industry, Marous has been featured by CNBC and CNN,
Cheddar, The Wall Street Journal, New York Times, The Financial Times, The Econ-
omist, The American Banker, Accenture and the Irish Tech News and has spoken
to audiences worldwide. Jim has also advised the White House on banking policy
and is a regular contributor and guest host for the Breaking Banks podcast.

You can follow Jim on Twitter and LinkedIn or visit his professional website.

© 2018 Digital Banking Report. All rights reserved. PA G E 7 4