The FOUNDeRY is Rand Merchant Bank’s disruption and innovation unit. Established in 2016, the FOUNDeRY researches and develops innovative technology solutions in order to experiment with the financial ecosystems required for the digital banking landscape of the future.
Fintech Disruptors: How important is it for financial institutions in South Africa to be using fintech solutions?
Liesl Bebb-McKay: It’s absolutely crucial. Some institutions may be using fintechs, while others may be using technology to build their own innovative solutions, but I actually believe they should be doing both. Unfortunately, in the South African CIB [corporate and investment banking] context, there isn’t a lot of depth when it comes to fintech, but there is a lot we can use from the international fintech space.
Financial institutions may not be able to stay ahead in the future if they are not accessing, and learning from, the new fintech value chain. Up until now, banks haven’t had a supply chain. In the past, the only things that banks bought were consulting houses or huge vendor solutions. So, this is the first time that we’re developing a supply chain of fintechs that are providing solutions that can either plug into the products that we are building, or that we can purchase and incorporate into our client value propositions.
Fintech Disruptors: How does RMB use fintech at present?
Liesl Bebb-McKay: Besides working with some fintechs, we are also viewing fintechs as an extended supply chain and as a kind of “external lab”. They are testing ideas, concepts and products for us, with us and with our clients and they’re failing and winning for the industry as a whole. We are playing the role of both participant and observer – this means we’re able to determine “Wow, that worked very well” or “No, that wasn’t such a great idea”.
Banks are great innovators, but also traditionally very fast followers; we follow what other industries are doing and when we decide to follow, we typically catch up and integrate. So that’s one of our strategies – experiment and observe, see what works and then adopt and integrate. To be able to do this, we have to practise some of these skills ourselves, so RMB has two main dedicated teams for this – the FOUNDeRY team and a robotics team. Within these teams we’re building internal skills while experimenting with some of these technologies. Thus far we’ve worked with data science providers, platform providers, vendors and partners and we’ve built many core skills. In the blockchain space, we have a dedicated team working on our blockchain solutions, which is a fairly big commitment in the South African context.
Fintech Disruptors: How does RMB’s use of fintech benefit your clients?
Liesl Bebb-McKay: We have two major focus areas in this regard. The first is called Future Back, which looks at the labs and what lies ahead in the future and how we then bring that back into today’s bank for clients.
The other focus area is Outside In, which entails spending time with our clients. We have a Design Thinking team in the FOUNDeRY, which dedicates time to ideating with clients and business areas and through that we hear their pain points, the things that are difficult for them in their own industry, and also in their interaction with us. That helps us to determine what solutions and insights we could be providing for them and what products we could be building with them. We are very aware that the client should always come first. It doesn’t help to get caught up in amazing technology that no one wants or needs.
We’ve also launched a series of client–fintech matching evenings, which are a bit like speed dating evenings. At these evenings, we invite fintechs that we’ve met, who we think have wonderful solutions, and we also invite our clients, and we say: “We love both of you, why don’t you have a date?”. It provides the opportunity for them to meet each other, and perhaps it can result in a tripartite agreement, where we work with the client and the fintech provider, or perhaps the two of them will work together on their own, and that’s also fine for us.
Fintech Disruptors: What are the risks and challenges of using fintech?
Liesl Bebb-McKay: The biggest risk is spending on tech for the sake of spending on tech, and that can become quite a rabbit hole – believe me – because AI and blockchain are really exciting! So, we must remain conscious of “Who’s the client? Who are we doing this for? What is the point?”
The other risk is that these new technologies bring in uncertainties that don’t exist when you use well-established and tested technologies. We built a risk model for fraud which uses an unsupervised algorithm, which means we can’t give the algorithm an answer – it’s unsupervised and must learn its own answer as it goes along.
From a legal perspective, it’s also difficult to work with small players. The traditional contracting of banks is geared to big vendors, and when we show these contracts to small start-ups they tend to feel overwhelmed. We’ve had to rewrite some of our legal contracts from an IP and audit perspective to make them more start-up-friendly, and then also provide a version in plain English, because they don’t always have legal teams to interpret all the legalese.
Fintech Disruptors: What international fintech trends are going to become huge in South Africa?
Liesl Bebb-McKay: The first major trend is the introduction of blockchain technologies. There’s no doubt that financial services will not look the same from a tech perspective in the future. I actually think South Africa is ahead of many markets in this respect. We worked on a project with the Reserve Bank known as Project Khokha, which won the best DLT [distributed ledger technology] project in the world at a Central Banking Publications event in Singapore in September 2018.
The second major trend is machine learning and AI. The development in this space is incredibly rapid. We are working and having conversations with many international players in this regard, such as the Julia computing team in Boston and AI players in New York and London.
The bots and voice trend will also become bigger and bigger in our space. We know from feedback from our clients that they are looking for more digital solutions, so we have to get our heads around the concept of a digital relationship of trust. What interaction still has to be person-to-person, and what can we turn into a digital human being that you trust and that you want to interact with? What does an intellectual conversation look like digitally?
Fintech Disruptors: Can fintech help to make the world a better place?
Liesl Bebb-McKay: At RMB we want to combine the work we do with changing the country for the better, and digital tech does allow us to do that. We’re investigating how we can use these new technologies to create products that change this country, whether that be through inclusion of unserved markets, environmental sustainability or by funding. We’re looking hard for win-win-win solutions that benefit us, our clients and the country. I believe that all corporates will have to start doing this if they want to hire great people – people want to feel good about the company they work for.