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Q&A: Jouk Pleiter, CEO and Co-founder, Backbase

Clare Ruel caught up with Backbase’s Jouk Pleiter at FinovateEurope 2017 to discuss the everyday banking revolution

IBS Journal: What does everyday banking mean to you?

Jouk Pleiter: It means that mobile banking will be on every smartphone in the world, so next to Whatsapp and Facebook. What we see is a future where mobile banking will transform from an application where you can just do transactions and a couple of payments into a platform that has a personal assistant powered by the likes of AI.

It’s like Google giving you recommendations based on the context, it predicts where you are. Uber also predicts your next destination, it’s accurate most of the time. The consumer wants protection over privacy. They can give permissions to the smart agent, therefore making yourself fully compliant with privacy regulations.

IBS Journal: How do you think these predictions help you as a company and help the user? 

JP: At the heart of what we do, we are a software company, people refer to what we provide as a white label; an out-of-the-box digital banking platform. The essence of what we do is where a lot of banks have problems. They have siloed legacy systems which cannot adapt easily to the digital world.

Think of Backbase as a new digital platform that sits on top of your core systems. It streamlines the customer journey from onboarding originations, self-service, etc. I think the great thing with the platform is it’s completely built out of building blocks, like Lego. You can add and remove stuff. It’s tailored to each user because it’s not a monolithic application, we can configure the right building blocks for each individual user.

IBS Journal: Why is it this better for both banks and the overall customer experience?

JP:  Look at mobile banking, it’s happening on a massive scale. Given the fact that companies like Goggle, Apple, Facebook, Amazon dominate the smartphone (they’re making huge investments in AI), their next step is, how do we make those applications smarter, more contextual? I think that’s the bigger transformation and, as there’s a privacy issue with Google or Facebook, this is the case with the bank as well.

I think having the app become more of a personal assistant is a win for the end customer as they get real advice and a win for the bank because it could enlarge their share of the market.

IBS Journal: What do you think are the main concerns regarding privacy for users of online banking and mobile apps? 

JP: With banking there is a little bit more anxiety, it is surprising to see how much people trust Facebook, Apple and Google. There’s more stress and anxiety when the bank tries to use transactional data or financial data; it’s a little bit creepy, right? You see that with Uber, so I think the only way forward is for banks to be transparent, you can opt in or out.

IBS Journal: Why do you think users now favour a more personalised approach to their customer journey?

JP: Backbase has a rewards scheme within the mobile app. So, if you purchase a specific item like a car or a bike, based on the transactional data, the agent can then make their recommendation related to this purchase, such as insurance. There’s a thin line between communication and spamming people. I don’t know if you remember the Windows paperclip, it must be very subtle to be meaningful, for example with Facebook or Uber you don’t even notice. You must start very softly, sometimes it is a process of trial and error.

IBS Journal: How do major banks, that need to cater significantly to higher user bases, implement a personalised strategy?

JP: We don’t have full clarity on that but I suspect that banks are not only competing with eachother but also with Netflix and Amazon from a user experience point of view.

On Netflix, I can start something on one device and continue on another one; that’s referred to as a seamless customer journey and is viewed as totally normal, why shouldn’t it be similar with my bank? Now we can see a paradigm shift; let’s start with the user, life events, how can we make things as easy as possible?

IBS Journal: What will happen if banks don’t react?

JP: I think they will become irrelevant over time. If banking isn’t convenient the customer is not going to bother.

IBS Journal: Do you worry that the older generation are being left out as they may not be as digitally savvy?

JP: No, not at all, the fact that you have these building blocks to create relevant experiences for different types of user segments is key here. I think with one platform, different presentation formats and the flexibility to tailor it accordingly, this is not a challenge. You can easily serve the total population. Across the board there is one common denominator, simplicity rules for every generation. Make it as simple as possible.

IBS Journal: Is everyday banking something that could give challenger banks an advantage over incumbents?

JP: Yes, I do think so, for example we work here in the UK with Metro Bank and Aldermore Bank and they are completely standardised on Backbase. They are mid-sized companies and very entrepreneurial. If they decide to change something, they can execute it quickly. They can simply move faster and that’s their edge as there is less red tape and bureaucracy.

IBS Journal: Why is this?

JP: I am flabbergasted that, in the last ten years, traditional banks with all the money in the world and thousands of customers are at a disadvantage. They are lacking agility; everything goes by process and committee. FinTechs have less corporate burden, compliancy and risk. The decision-making process and execution process is faster.

IBS Journal: What do you think are the major issues that banks face in personalising customer journeys and implementing everyday banking solutions?

JP: Firstly, I think the major banks have a different problem, their baseline problem is that they have siloed legacy systems. I think they can do a little artificial stuff occasionally but most traditional banks struggle with transforming their operating model; departments need to collaborate to make this work but everything runs by process. Backbase creates a more flexible, nimble, digital and agile layer on top of these legacy systems.

IBS Journal: Do you think FinTechs have a bigger advantage over the banks? Can they take bigger risks? 

JP: I think so but if the traditional banks want to make a profit and survive, they must act, they have money but are less agile. We saw it in the early dot.com days. Lots of startups appeared but only a few survived like Amazon.

One thing that we see with a couple of our clients is there’s massive anxiety regarding privacy and transactional data, if they go too far and are not completely transparent, people will not like it. A couple of traditional banks made the big mistake of not asking the consumer for consent and just rolled it out; this backfired. I think the rule here is, if you do start to use personal data, be agile and transparent. There’s this whole other discussion, who owns the data and who can use it? Is it your data? Does it belong to the bank, Google?

IBS Journal: How do you see the progression of everyday banking over the next few years?

JP: In the next five years, every bank must go through a full digital transformation which means they will probably reduce the number of branches significantly. It’s also expected that call centres will reduce, everything will move to online or mobile. Traditional banks must reduce those high cost contact points with low cost digital touchpoints. Everything must go digital and be multi-device, less people involved equals lower costs. Digital transformation is about two things; firstly lowering the cost income ratio of the bank and making more competitors and secondly, customising the digital customer experience so you are in a direct dialogue with your end user.

IBS Journal: What about customers who still like High Street banking?

JP: I don’t think that branches will completely disappear or the human touch for that matter, but in the Netherlands banks are reducing by 70% although they still have advisors. The bank will come to you at work or home. But for a low level, self-service situation you don’t want to do that as it’s too costly. However, for something more complex like a mortgage or a long-term loan it’s certainly a viable scenario, combining it with video chat.

Doing this at a larger scale is a lot of work and neo-banks have a slightly better user experience but they are not ten times better. The Uber app is ten times better than finding a cab on the street. That’s a standard rule in Silicon Valley, it needs to be ten times better than the alterative. Facebook, Messenger, Instagram, Snapchat, Uber, they all introduced something from a completely new perspective. Neo-banks don’t do this, if there is no ten times better effect it does not result in exponential growth.

IBS Journal: What are your predications re. both everyday banks and FinTech startups when Brexit kicks in?

I think it’s a shame that it happened but I don’t know how it will play out. There may be a reduction in banks in the UK, who knows? But it depends on the outcome of the agreement with Europe, hectic times ahead!

IBS Journal: Could you tell the readers of IBS Journal a bit about your seven-minute pitch at FinovateEurope?

JP: We wanted to show the latest innovation in AI and PSD2 combined. We presented three everyday scenarios where you can see an agent participate directly with you. For example, if you have been saving for a designer bag, the app will give you financial advice and recommend insurance.

The second part is PSD2; we can do account aggregation. You can link your ING account to your Backbase app simultaneously. The key message was, in the next three to four years AI will go mainstream.

IBS Journal: You mentioned something about loyal customers getting rewards, what about bad customers? How would you pull them back into using the app?

JP: For bankers, it’s not uncommon for them to want to ditch their bottom 10% as they just raise costs but not profits. If they are an unprofitable customer, why not stop the relationship? But if they are at the tipping point, maybe the FI can do something to put them back on the right side of the track.

 

 

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