[Article has been updated on 21 August, 11:25am]
“People have been forced to stay at home and cash transactions have been seen as a potential virus-transmission risk,” said Myles Bertrand, Managing Director of APAC at Mambu.
They have also avoided ATMs as the Covid-19 virus spreads through touching of common surfaces such as ATM keypads and touchscreens.
With that, Covid-19 may have forced some banks to accelerate their digitisation plans, which sees them turning to digital banking platforms such as Mambu.
The digital financial services industry is certainly one industry that has benefited from the pandemic.
In this interview with Myles, we explored the role of Singapore-headquartered Mambu and what he thinks the digital banking landscape in Singapore will look like in the future.
Moving Away From Traditional Banking
The company was founded by Eugene Danilkis, Frederik Pfisterer and Sofia Nunes. It launched in Berlin in 2011, and later opened its Asia Pacific HQ in Singapore in 2016.
Mambu works with established banks, challenger banks, lenders, payment solutions providers and other financial institutions.
Challenger banks are essentially small retail banks that compete directly with the longer-established banks, sometimes by specialising in areas underserved by them.
Myles explained that Mambu “forms the technological foundation as these institutions launch new digital banking products and services, or even launch brand new digital banks.”
So what exactly does a digital bank do?
Simply put, a digital bank offers the same type of banking services a traditional bank does, except it operates entirely online without any single physical infrastructure, such as a bank branch.
Therefore, customers of a digital bank can control their finances entirely from their smartphones and computers.
With Mambu, banks can do away with the maintenance of cumbersome legacy technology systems of banks and financial institutions, leaving them free to concentrate on their core business — which is to provide services to customers.
Mambu’s digital banking platform offers banks and financial institutions the freedom to make changes to their system at any time, the ability to switch between vendors if and as desired, and the option to add new products within days, or even launch a brand new digital bank within a few weeks.– Myles Bertrand, Managing Director of APAC of Mambu
Mambu uses what’s been coined ‘composable architecture’, which refers to the flexible assembly of independent, best-for-purpose components, and utilising open APIs.
API stands for Application Programming Interface, which is a software intermediary that allows two applications to talk to each other.
Each time you use an app like Facebook, send an instant message, or check the weather on your phone, you’re using an API.
Instead of being locked into a monolithic core banking stack with hard-coded integrations, composable banking optimises for speed, agility and freedom.
Mambu is currently the only digital banking platform on the market that operates exclusively in the cloud — but what does it mean?
The term “cloud services” refers to a range of services, from software subscriptions to infrastructure, delivered over the internet.
Being “cloud agnostic”, the platform can operate on AWS (Amazon Web Services), Google Cloud, Microsoft Azure or any other in-country cloud solution.
To put it simply, agnostic in the IT context means the ability to move from one cloud to another without much impact to the IT systems and business processes.
One notable client of Mambu is The Wallet Engine (Cheers Paytech), a Singapore-based mobile wallet service.
Initially, the startup was developing its architecture on a cumbersome legacy core banking system. Not only did it lack agility and slowing them down, it also restricted the range of services the business was able to offer.
It decided to tap on Mambu’s platform to facilitate the backend movement of funds within its system with ease.
Mambu’s cloud-native and API-first architecture helped the team to get to the testing stage within a matter of weeks, enabling a composable solution that empowers them and allows The Wallet Engine to be as agile as their customers need them to be.
Securing Partnerships And S$68M Funding
In June 2020, Mambu announced its partnership with Google Cloud.
This is a really important milestone for us – it’s the next step in a strategic pathway to become multi-cloud, or cloud agnostic.– Myles Bertrand, Managing Director of APAC of Mambu
With the partnership, it offers their customers greater choice – on top of their existing partnership with AWS – and “will particularly help them in some of the countries in Asia Pacific where data residency requirements are still in place, such as in Indonesia”.
Data residency means collecting, processing and/or storing a citizen’s or resident’s data inside the country.
Mambu currently operates in over 50 countries, serving over 20 million end customers.
“Our partnership with GoBear and CredoLab is also a really exciting project, and demonstrates the power of collaboration. Mambu’s composable digital banking platform will form the core system in GoBear’s lending architecture as it expands across Southeast Asia, starting in the Philippines,” said Myles.
CredoLab’s innovative credit scoring API will be integrated into the solution, which will help to generate a credit score for customers who cannot provide their creditworthiness via conventional means.
CredoLab – a long-term Mambu partner – helped establish GoBear’s partnership with Mambu, in an example of how Mambu works with its ecosystem of partners to build effective end-to-end solutions for its customers.
Mambu has also raised a total of €42 million (S$68 million) over five funding rounds.
Their latest funding was raised in February 2019 from a Series C round. Led by US-based Bessemer Venture Partners, the world’s leading SaaS-focused venture capital firm, they raised €30 million.
The Problem with Traditional Banks
The long-standing issue with traditional banks is their business model and approach towards serving customers.
Typically, large and traditional banks are not very efficient in their operations and adapting to new trends.
Challenger banks are luring younger customers with new banking approaches that fintech (Financial Technology) has to offer.
In the same vein, traditional banks are slower in adjusting than challenger banks, especially in adopting cybersecurity measures.
As data has shown, large conventional banks are more vulnerable to cyber-attacks than fintech.
Cybercriminals find it easy to penetrate the systems of large and conventional banks because the institutions do not place a huge focus on technology as much as fintech does.
While fintech are not spared of vulnerabilities, their focus on using technology to improve the banking process makes them better-placed to deal with cybersecurity issues than their conventional counterparts.
But Is Fintech More Secure than Traditional Banks?
Financial services companies, especially banks, collect and keep much information about their clients and their accounts.
This puts them at a greater risk of falling prey to cybercriminals who deliberately target the information during the attacks, access the accounts and steal the money.
Therefore, there is great emphasis on banks and other firms that offer financial services to protect the data of their customers at all costs.
However, fintech focuses on securing the data of their clients using technology, which puts them in a more favourable position than traditional financial companies.
A report by PWC indicates that fintech can quickly adapt to changes in the market and develop strict cybersecurity measures to counter new threats.
Thus, it is easy for the new banks to focus on securing the activities of their clients on their systems than for large conventional banks.
“In terms of security and protection against fraud, Mambu has partnered with Swiss fintech NetGuardians, integrating its AI-based fraud prevention solution into the Mambu platform,” explained Myles.
“It is open API-enabled, and Mambu’s customers can choose from a wide range of best-for-purpose components from vetted partners in the Mambu Marketplace, or select their own trusted partners to meet business or regulatory requirements.”
Furthermore, the use of open technologies by fintech revolutionises the way the companies handle client data. It is common for fintech to share information with their clients openly and whenever the customers need to access the data.
In the case of traditional banking institutions, the norm has been that the banks cannot easily provide their clients with access to all the data that the organisations keep.
Therefore, the open banking approach helps fintech to improve their services and handle client data in more transparent ways.
How MAS’ New Digital Banking Licences Will Change The Industry
Last year in June, the Monetary Authority of Singapore (MAS) announced that it will issue up to five digital banking licenses.
“The industry is waiting with great anticipation for the MAS to make its announcements about which non-bank organisations have been successful in securing one of the five new digital banking licences,” said Myles.
“When this announcement is finally made, we expect to see the rate of change accelerate rapidly in Singapore, as the approved licence holders launch their new product offerings and competitors step up to also stake their claim,” he added.
The intention behind MAS assigning these digital banking licences is to better serve the ‘under-served and under-banked’ segments of the Singaporean population, allowing consumers and businesses that may have previously been shut out of traditional banking to access financial services.
The introduction of these new licences was to fill up a gap rather than increase competition, although increased competition will most definitely be a side effect.
The ‘gap’ in this scenario is the approximate 73 per cent of people living in Southeast Asia who don’t currently have a bank account – it’s a sizeable market, and one which should encourage plenty of new players.– Myles Bertrand, Managing Director of APAC of Mambu
However, according to Myles, with Covid-19 delaying the announcement, it may happen sometime in the second half of 2020, with successful applicants launching their new operations by mid-2021.
It may be an uphill battle for digital banks here as traditional banks already have advantages such as a strong brand and an established customer base.
Moreover, they have already started their own process of digital transformation. Therefore, it will be a challenge for new digital banks to build a customer base against more established conventional banks.
The Future Of Digital Banking In S’pore
When asked why Mambu decided to set up its headquarters in Singapore, Myles said that Singapore is “a central hub for technological innovation, as well as a respected leader that other countries will look to for inspiration”.
Singapore is one of the frontrunners in Asia Pacific when it comes to digital banking, with an innovative and tech-savvy financial services industry, a forward-thinking regulator (MAS), and a long history of early adoption of new technologies.– Myles Bertrand, Managing Director of APAC of Mambu
Banks that fail to evolve digitally will ultimately fail to exist as the digital banking revolution takes hold.
With this in mind, many incumbent banks in Singapore have been feverishly working on their digital strategies, launching new digital products, introducing new technology and even launching brand new, standalone digital banks, like United Overseas Bank’s ‘TMWR’.– Myles Bertrand, Managing Director of APAC of Mambu
While we anticipate the emergence of digital banks in Singapore, the government will pump in money to grow the fintech industry.
The scheme aims to encourage the expansion of the existing innovation labs and further develop Singaporean talent in fintech, according to MAS managing director Ravi Menon.
Featured Image Credit: Mambu / PYMNTS.com