Community banks by definition are traditionally bound by geography that cloud banking deems irrelevant. Now foreign tech firms are reaching into the United States and jumping into the increasingly competitive field of all-things-cloud.
Does a fintech firm’s country of origin make a difference in how they are prepared to be experts in the domestic market? BankBeat spoke with Edgardo Torres-Caballero, Managing Director in the Americas for Mambu, a Berlin-based firm that has partnered for the first time with a U.S. company in order to offer its version of cloud banking here.
What does a global perspective bring to the community banking market in the United States?
Edgardo Torres-Caballero: Having grown up in a different technological and regulatory environment, Mambu has a broader view of the possibilities for U.S. banks that are at a much earlier phase in their digital transformation than banks overseas. Banks continue to grapple with ineffective and slow implementations of legacy banking technology. As such, we are increasingly hearing about the demand for customized technology that is efficient and agile, and that allows banks to launch new products in months, not years.
A newer concept, called “composable banking” is focused on cloud-native, flexible and fast technology that allows scalability and innovation. We have learned from experience that an API-composable architecture allows traditional banks to launch new products much more quickly and efficiently, which would be a huge development.
How does a non U.S.-based fintech find a way in?
E.T-C.: Community banks are deeply frustrated with their current core providers, many of whom offer decades-old technology for quite a high price tag. As such, they are not opposed to working with emerging players, particularly ones with demonstrated success.
It’s also important to add that decoupling from legacy systems is not really a matter of preference anymore; it’s a necessity for survival.
In terms of what gives fintechs an edge with community banks, offering digital channels that will allow local financial services players to connect with younger consumers, and therefore offer expanded growth opportunities, is huge. Additionally, fintechs who can provide these new product offerings at a fraction of the cost of legacy players are going to be very appealing to community bankers, who have to be particularly careful with their balance sheets.
What’s a good way to think about how such tools enhance the CRM experience overall?
E.T-C.: Smaller banks have the ability to leverage cloud technology to streamline lending processes, which would not only free up manpower, but also bring in new customers due to greater efficiency. API-first platforms can allow small banks to grow in multiple geographies as well as scale considerably. I would urge small banks to take seriously cloud banking services because these could seriously boost their business growth.
Regulators don’t want to stifle innovation, but following the rules is of utmost importance. What’s your approach here?
E.T-C.: Mambu’s platform complies with all industry security and process standards, including ISO 27001 and SOC. This allows Mambu to operate in multiple regulated jurisdictions — and it keeps our customers safe, because we ensure they’re complying with industry regulations as well.
Our dedication to compliance is complemented by the strong tech ecosystem in which we operate, and this allows for connectors into anti-money laundering, enterprise resource planning and regulatory compliance best-of-breed systems providers.
A lot of bankers are on the fence on cloud banking. Do you think it’s inevitable?
E.T-C.: In 2020, we are going to see more banks migrating to the cloud than ever before. Banks leveraging the cloud is not only inevitable, it will become a reality as more community bankers choose the right side of the fence. Not only will banks see cost savings from cloud migration, but their processes will become more simplified and streamlined, which will improve and enhance customer experience.
In addition, staying ahead of the competition is vital in the oversaturated fintech market. Adopting a cloud-first solution can be one of banks’ biggest key differentiators. At this rate of cloud adoption, in the next 10 years the banking system will be completely digitized.