Expleo has recently been shortlisted in the RegTech Insight Awards 2019 as a leading provider of technology solutions for regulatory compliance. Our data experts have developed a new tool – the Data Feed inspection Tool (DFiT) – to improve the reliability of the data that banks send to regulators and reduce the time spent correcting errors.

To comply with European regulations such as MiFID II and EMIR, banks now have to manage increasingly large and complex sets of data from a wide variety of sources. As an example, under the AnaCredit scheme introduced in September 2018, banks have to report every individual loan they issue in the euro area to the European Central Bank (ECB). The ECB has shared a checklist of more than 2000 checkpoints to validate before each quarterly submission.

Expleo’s solution helps clients by measuring and reporting on compliance data quality, in order to identify and remediate inconsistencies before submission. DFiT for AnaCredit is built on Talend Data Management platform, as a ready to use solution. It translates the various rules laid down by the regulator into clear jobs, which run through the data sets to identify inconsistencies. These jobs can include file formats, date format, decimal places, ISO/ISIN format conformity, consistency of data between different data sets, validity of identifiers and so on. DFiT as a framework can be extended to validate other regulatory reporting feeds as well and it can be configured in any data management platform.

Expleo’s expertise in end-to-end quality management is coupled with its understanding of bank’s regulatory requirements, built on long-term client relationships. We put this knowledge at use to provide the right implementation approach, to successfully address the needs of regulations that require periodic reporting of data feeds.

Following the UK Department for International Trade’s UK FinTech State of the Nation Report in May this year, Kate Cordell from Expleo offers advice to FinTechs on best practice when working with traditional banks.

Banks and FinTechs are increasingly in need of each other. For incumbent banks, the adoption of new technology is business critical in the face of changing customer expectations and increased competition from more agile challengers. For start-ups, limited audiences and market consolidation is making partnership more attractive than going alone. But integration is rarely straightforward, especially when it brings two such different cultures together.

The FinTech industry has matured in recent years, creating new business dynamics that call for a more peaceful approach. Meanwhile, banks are building their own technology to get ahead of competition and fast-track innovation, with 56% of traditional financial institutions having put disruption at the heart of their strategy, according to the UK Department for International Trade’s UK FinTech State of the Nation Report which came out in May 2019.

Nonetheless, banks still face limitations that FinTechs can solve. FinTechs can help banks engage younger audiences as well as deal with the challenges presented by re-architecting both the technology stack and their operating models. FinTechs that help banks to navigate regulation and monetise their customer data may enjoy considerable success themselves.

For FinTechs, the security of partnering with an incumbent has become more attractive, given the growing number of start-ups and the shrinking number of opportunities. FinTechs are also finding their ambitions curbed by the dominance of the big high street banks. By joining forces with the banks, FinTechs are better positioned to access the global mass market.

Are we therefore moving into the era of co-disruption?

82% of incumbent banks expect to increase FinTech partnerships in the next three to five years. Lloyds’ decision to partner with Thought Machine (TM) , to accelerate and ease the pain of digital transformation, is an interesting indication of where the market is headed. Lloyds will migrate 500,000 customers onto Vault, TM’s cloud-native core banking technology.

ClearBank, the UK’s first new clearing bank in more than 250 years , aims to compete on price, because its cloud-based tech platforms are unencumbered by labyrinthine legacy systems. FinTechs that can offer the golden combination of lower cost and reduced friction to banks will find a willing partner.

However, the practicalities of working together are less clear cut. Given that many FinTechs were conceived as an alternative to traditional banks, how can these potential competitors come together?

Expleo has identified five major hurdles that need to be crossed before FinTechs can reach the finishing line:

Challenge #1: How to improve your ecosystem

With competition increasing, it can help to meet the right person on their terms by getting involved in accelerators and innovation labs. Collaboration with an organization that already works closely with banks can help secure privileged access to potential partners and give an insight on their pressing issues.

Challenge #2: How to progress within the bank’s culture

Slowed down by legacy systems and bureaucracy, banks can lack the internal processes to fast track the embedding of new solutions. In the eyes of the FinTech, they are following a more convoluted route than necessary, but this is due to the complexities of scale. This is frustrating, but also largely unavoidable – FinTechs should prepare to reset their watch.

Challenge #3: How to tackle regulation, compliance and cybersecurity

The bank’s need for control can feel bureaucratic, but those restrictions are there to deliver a high quality, stable product. FinTechs that underestimate the enormity of milestones or the need to demonstrate the right depth of due diligence, run the risk of losing the confidence of both the regulator and the market. FinTechs must provide robust evidence that their tech is fit for purpose, differentiated and will address the customer need.

Challenge #4: How to manage change with structure and agility

Capability modelling, target operating models and process mapping can be low on a FinTech’s to-do list, but they provide valuable infrastructure for smoother progress. For example, a lack of governance of the ecosystem and processes can lead to poor visibility on the project. The right management consultants will be able to help both sides to prepare for the business change impacts from merging two very different cultures.

Challenge #5: How to prepare for scaling up

The pressure to expand a successful pilot and demonstrate proof of value as soon as possible can lead to rapid growth that causes your architecture to creak at the seams. Having a focus on quality in design stages will provide confidence to the bank that your technology will be successful at scale. Quality in design means paying careful attention to how the solution will be tested and proven – if this is overlooked it can be difficult for the implementation teams to evidence the quality of the solution before it goes into production.

Learn from experience, not your own mistakes

Disciplines such as stakeholder management, compliance, quality management and change management are critical to a successful partnership with a bank. For FinTechs without expertise in these areas the right third-party support can save considerable time and effort.

Entrepreneurs are naturally inclined to take on everything themselves. When things go wrong, they can end up calling for a ‘white knight’ to ride to their rescue and get the deal back on track.

Therefore, it may prove more cost effective to engage a ‘black knight’ that can help you navigate the most common pain points in a proactive way. Why learn from your own mistakes, when you can benefit from another’s experience.

Since the introduction of the iPhone, a significant technological shift in society has been influencing the way the world’s leading enterprises operate, both internally and externally. That shift has been driven by growing consumer demands for information and services instantly and from anywhere, through their mobile devices.

Recently, amid those growing demands, a world-leading bank recognised a need to evolve its IT capabilities to keep up with the digital trends impacting the financial services industry, and to provide its customers with mobile banking experiences.

With its legacy business processes and dated IT structure, the time from new feature or product request to release was around 18 months. Crucially, the leadership team acknowledged that this was unacceptable in the eyes of today’s digitally-literate customers.

In 2017, the decision was made to embark on a transformation from a traditional top-down waterfall business model into a fully agile organisation. This would allow IT to deliver new features and products – and, in turn, additional value to the customer – at pace, with flexibility, for lower costs.

Why they chose Expleo

Expleo has been a preferred partner for testing and quality assurance of the client since 2009. Thanks to that existing relationship, we already had around 80 of our specialists within the organisation, working as testing engineers and helping the organisation maintain the level of quality that Expleo prides itself on.

Quality is often the first thing that is deprioritised when a business attempts to make itself faster. But that is a grave mistake, and they understood that quality should always be a priority, not just within business processes but also within company culture.

Challenge

A key cultural challenge facing them was a fragmented relationship between business and IT. It was recognised quickly that, in order to succeed with an agile transformation, they would need to stop thinking about business and IT as separate. The two must work in harmony to achieve the same goals.

•  Other challenges they were facing at the time, included:

•  An architecture which was not quite ready for the transformation

•  IT’s coding rules, principles, and discipline were insufficient

•  Digital security rules were inadequate

•  IT processes were too complex or long-winded

•  Automation, continuous delivery, and deployment were not yet possible

So, they sought out our experience to assist with the agile transformation and expanded the partnership to include comprehensive coaching and training while changes occurred in key areas of the business.

With our quality-focused philosophy, we contributed to the early strategic planning stages of the transformation initiative and, went on to provide a combination of management consulting and coaching.

Solution

The result of those early strategic planning stages was the creation of a multi-year initiative, involving 20 ‘tribes’, containing over 200 hundred ‘squads’, made up of around 2,700 employees in total. This would incorporate a number of IT disciplines, including Agile, LEAN, SAFe, LeSS, DevOps and Management 3.0.

This meant first establishing an internal Transformation Office to bring cohesion and transparency to the initiative, support decision making, steer the bank-wide investment portfolio, and help company culture and behaviours change to embrace the shift to agile.

The client then leveraged our extensive skills and expertise to ensure this initiative was guided by thorough coaching and training. Once the Transformation Office was in place, the main functioning principles which were introduced to facilitate the transformation were:

•  Introducing small ‘squads’ with high cadence of development (two to four weeks)

•  Synchronising frequently through ‘Demo’, allowing to adjust rapidly when needed

•  Releasing value (new features) on demand, managed at ‘epic’ level

•  Only committing as far ahead as the next quarter, reviewing priorities based on the market and customer feedback

•  Priorities coming from the portfolio are pushed to ‘tribes’ and ‘squads’ while remaining open to change based on bottom-up feedback

•  All of this also was overseen by functional bodies called ‘guilds’ to manage standards and maintain best practices

The outcome

The organisation is currently on track to meet its target for squads to be able to deliver new features and products independently, and at full velocity, by the end of 2019.

This progression has been enabled by our training and coaching in the following key areas:

•  DevOps: Release automation, application configuration management, and cloud

•  Test Automation: Regression testing, automation, and behaviour-driven development

•  Agile Maturity: Tribe independence, squad independence, and guild standards

•  Architecture: Micro-services, target architecture, and transversal digital capabilities

The client’s employees are now being encouraged to learn new skills and make decisions to benefit their own work within the agile culture, which will in turn improve productivity and employee satisfaction.

One of the main advantages Expleo brings to a large-scale initiative like this is our background in testing and quality assurance, which enables our consultants to provide training and coaching enriched by their own hands on experience in IT.

Creating close relationships with the workforce has allowed the transformation towards agile to succeed, not just from a technical point of view, but from a cultural point of view as well, and that is a huge point of differentiation when introducing a new way of working on an enterprise-wide scale.

When employees are working smarter, and faster, while maintaining the appropriate levels of quality, the business will invariably see direct benefits through the extensive value which is being delivered to its customers.