Trusek: Collaborate to win the fintech battle – Steven Hatton
As the banking market readies itself for new regulation that will open up the playing field to more competitors, there are those who feel the challenge from fintech companies could change the face of the industry dramatically. Others, such as Steven Hatton of Trusek, see an opportunity where others see risk.
Banks are always in a process of adapting to regulatory reform, and it is seen as part of the cost of doing business. The latest changes, however, could make the market very challenging, and banks will have to fight for their place in it. The updated Payment Services Directive (PSD2), for example, will open the gates to more newcomers, and fintech companies are readying themselves.
The new legislation will regulate new forms of payment institutions, introduce new interaction models and mandate the opening of banks' application program interfaces (APIs) - the tools for building software applications - to third parties.
"With PSD2, there will be an impact from third-party payment service providers - PSPs. If banks see this as an opportunity and not a threat then they could get ahead of the PSPs. They can use the customer data they already have, which will take the PSPs a year or two to get. The problem is that banks are not ready with their APIs. They must be proactive or they will lose customers," says Steven Hatton, co-founder and director at Trusek.
"Some banks are very proactive but others have their heads in the sand. To gain an advantage, they must recognise the opportunity and take it. People say that banks' legacy systems are unable to react, but it is more about their mindset. Banks are reactive by habit, but that needs to change. If not, the fintech industry will change it for them. They must go beyond simple compliance and get in front of the problem," he adds.
There for you
Founded in 2015, Trusek provides a digital solution that opens up the advanced features to smaller businesses that are normally only available to major institutions. In the banking space, its platform offers cost-effective banking facilities - including current and savings accounts, loans and mortgages, card programmes, microfinance, FX and wallets - for start-ups and challenger banks across all channels.
The company's co-founders initially developed a P2P currency exchange platform to make foreign exchange trades cheaper; it followed that with a cross-border card-to-card transfer system. These technologies provided the basis for Trusek's current development programme, which has yielded solutions that can help larger banks deal with their API challenge.
"We not only have the core banking platform but also the Trusek Connections platform. This can act as a bridge for a bank. If it has account information in silos then it will be hard to access all of the customer information it needs. There will be multiple APIs for account information that will be requested by multiple service providers. That leads not only to complexity but also to a security risk on 100% of the connections into the banking platform," says Hatton.
Connect and thrive
Trusek Connections brings multiple platforms - including those of other financial services providers - together in a network. The result is complete interoperability through a controlled and cost-effective solution that allows private label international network capability across and between disparate client environments and third parties. It also enables the simple activation of service enhancements from new providers via a single point of integration.
The solution opens up a different way for banks to address a potential threat. Rather than fighting the fintech challengers, a bank could build a platform for collaboration with PSPs.
"The platform can reduce workload and improve security. It allows banks to bring in third-party service providers to supply more customer services. Customers trust banks more than they trust third-party PSPs. So, banks can gain from bringing new services in house," explains Hatton.
"Some people say that fintechs will destroy banks. Banks say that fintechs are too small to do that. Both now see the advantage of collaboration. Partnership is the way out of the problem. Banks could stall and prevaricate because the new regulations are not set in stone yet, but there is an opportunity for some of them to leap ahead. You need to have a holistic approach that includes collaboration between banks and fintechs. It will benefit customers because they will be able to manage their affairs and access more services through a single portal."