As a co-founder and CSO at Finologee, Jonathan Prince was a valuable contribution to the market research and resulting report "Finance and FinTech Innovation 2025 – Hybridisation Designs the Future of the Finance Industry".

We spoke with him about the current state of banking, the role that FinTech companies have in finance, and the importance of RegTech to ensure a reliable finance industry in the future.

Less branch, not branchless

Jonathan has been around for some time. He saw the sector change, but never as fast as it did in 2020: "Digital was a nice to have in the past for a bank, and today it's a prerequisite. Whether you are a bank or insurance company, you cannot afford not to provide digital interfaces, digital tools, digital processes."

Yet, Jonathan does not want to talk about the end of branches yet. He firmly believes that there needs to be a mix: " Opening a branch today is no longer the solution it once was. The vast majority of people no longer goes to branches for daily banking services."

Nevertheless, branches still prove valuable for a significant proportion of people in the context of life-changing events that require financial advice. The key question is, though, how to integrate digital assistance to enhance in-person advice?

For private banks, this question becomes even more pressing. Jonathan: "We serve mainly private banks for some of our product lines, and we hear what they struggle with, and clearly, the KYC and AML concerns are also real for them."

Private banks cannot afford reputational damage, so their compliance needs to be bullet-proof. On the other hand, the time spent by customers on administration must be kept at a minimum, and it should not be part of the relationship-building in a branch.

RegTech augmenting the value of branches?

Every minute spent in the branch must be time well-spent to better understand the customer's needs, dreams and aspirations, not filling the administrative gaps.

"If you want to maintain the right level of trust, you need to make sure that you know your customers and that you are appealing to them in the onboarding. Filling in forms or running the client through a list of questions during the sales talk is a hassle that must be avoided. Even when you do an update, you need to provide them with the right tools to do so", explained Jonathan.

"Digital onboarding is key, as are digital updates, including periodic reviews to ensure financial institutions have the latest information on one's identity."

RegTech companies help banks in making these required checks as effortless as possible. At Finologee, they see RegTech as the crossroad between compliance, technology and user experience.

Jonathan: "User experience is not only for the end-users, but also for the employees, the staff of the bank sitting at the back office, doing their operations or at the front office for those dealing with customer advice. If, as a RegTech company, you don't consider what their tasks are and how you're going to make their lives easier, your product is not relevant. These three dimensions are crucial."

Let banks do what they are good at

"Banks are basically here to manage risk on behalf of their clients, who are trusting them to manage their assets. These financial institutions want to ensure that they put in place all the processes and procedures to mitigate and control the risks around them and maintain trust", shared Jonathan.

More modular software, (hybrid) cloud computing and concepts like DevOps allowing more flexibility in software development have drastically improved the efficiency and flexibility of IT departments. Ten years ago, a product release took two to three years for a bank, which is often down to two-three weeks today.

Jonathan rightfully observed that this required a shift from a risk-management focused company to a product company. This, in turn, can only succeed with a cultural change within banks, which is hard to admit for these institutions.

Yet, this cultural change is a prerequisite to avoid what Jonathan calls the ultimate risk: being disintermediated like what happened in the telecom industry.

"Embedded finance could be an opportunity for banks to refocus and redefine what they're really good at, just anticipating what will be the main focus over the upcoming years", reflected Jonathan, even though today, it remains unclear how that could look like.

Conclusion

Financial services are in troubled water for some time, and it does not look like this will change soon. Huge tankships like banks or insurance companies will need more flexible support from smaller organisations to move in the right direction.

Everyone must keep their eyes open and respond swiftly whenever needed. FinTech companies like Finologee help banks and insurance companies to do what they are good at. They assist these big corporations by focusing on pain points mainly around digital onboarding and KYC-AML tasks and processes.

This article was first published on the Banking Scene.