Taking the chance out of innovation with innovation as a service

Erin Dangler:

Our society doesn't like to be kept waiting. We want entertainment on demand. We want restaurant meals delivered straight to our door and we want access to all our financial products instantly, day or night.

Adrian Sturley:

From the UK perspective, we've been kind of running with that for a number of years now in the banking world where it's getting faster and faster, more on demand, more capabilities that we want immediately to compete with everyday life. So partly we are driving that. From my perspective, unless you do that, you can't keep up, you'll get lost, you'll get left behind.

Erin Dangler:

And it's thanks to our need for speed that financial institutions are delivering more innovations faster than ever before.

Jason Williams:

Concept of where we used to be, where you talk about a five year roadmap, people are now talking about agile speed to market. We need to be delivering in sprints. So your five year roadmap, the expectation now is you're delivering that five year roadmap in three years. And how do you go do that? The ability to rapidly stand up infrastructure is now commonplace in the financial services industry.

Erin Dangler:

This is Financial Futures, the podcast that charts the frontiers of FinTech innovation. In this series, we'll be looking to the future to find out how fintech's and financial institutions are gearing up and developing next generation innovations to meet the challenges and needs of tomorrow's world. I'm your host, Erin Dangler, and in today's episode we'll be examining innovation as a service. We'll find out what innovation means to fintechs and institutions and we'll look at some of the advances that are already having a positive impact on the financial services industry. We'll also hear how innovation is helping to make access to products and services more equitable and how it's bridging the gap between crypto and fiat currencies. Joining us in today's discussion are vice presidents of Impact Ventures at FIS, Adrian Sterling and Jason Williams.

Now we all have an idea of what innovation means, but how does it work as a service?

Jason Williams:

I think the broad definition of innovation a service is creating a process to identify, rank and create new offerings that can be brought to market quickly. The overall goal of that offering, having some strategic impact on your customers and your organization and then your key success drivers being the ability to innovate and bring something to your customers rapidly. But almost as important I think is recognizing that not all solution offerings will be 100% successful and focusing on your wins and moving along quickly from your misses.

And then from a market delivery perspective, we are launching what we're calling the FIS BaaS hub, which is a platform that really enables banks, credit unions and fintechs to build digital banking and payments ecosystems that they need to deliver innovation to merchants and consumers and users. So with that allows for more opportunities to deliver embedded finance solutions to deliver kind of differentiating customer experiences.

Erin Dangler:

Great. Ade, do you want to add anything to that?

Adrian Sturley:

I would only add that coming from a fintech perspective, when you work in a fintech and then you're working in larger organization, you understand where innovation can play because as a fintech you can get stuck in the innovation cycle. Right? You can just keep innovating and trying to keep working on building something and never get into a execution contract piece of work. So it's understanding almost where it stops as much as you know what it is. I think the fintechs show quite well they can develop things really quickly, they can be really agile, they can have rapid technologies and they can create stacks really quickly. It's about then actual execution. So I always see the innovations and service being added to by the execution capability of getting into these organizations quickly and proving that technology and then innovating on top of that so you never finish.

Erin Dangler:

And so with this partnership, it's like a blend of mentorship and partnership. And you've already talked about some of the impacts like scalability, but what are some really big impacts that innovation as a service can make? Can you give me some examples of some companies you've worked with and how they've grown?

Adrian Sturley:

I think from my perspective, one of the areas is RegTech. So we've had a FinTech come to our accelerator recently, and this is quite exciting because if we can get into the financial regulatory areas and start to try and innovate in there, obviously supporting that regulatory framework that we're given, but make that an easier path, then that's a huge impact the innovation as a service can have because some of the biggest areas are in that space of operational regulation. And the regulation is there for a purpose, you don't want to bypass it, but if you can make it easier from the functioning perspective and the business perspective and you can still be highly regulated and you can still be highly functional, supportive of that, but then do it in a faster way, then that's the real area that I think is quite exciting.

Jason Williams:

Yeah. I kind of view it as maybe three kind of verticals that I see it in. So the first is in terms of where we can make big impacts, this is the first one I'll call financial servicing anywhere, anytime. So you've opened up financial ecosystems that have been traditionally exclusive domains for banks and you've really created the ability to partner with banks, provide the ability for non-bank entities such as fintechs, merchants, et cetera, the ability to offer embedded payments, embedded lending, the buy now pay later explosion that we're seeing. So really enabling those type of technologies in non-traditional bank channels.

And then from the banking perspective, I always view it as we help smaller banks grow. So we've got, I guess, hundreds if not thousands of local banks, community banks, credit unions across the US. And so with the innovation as a service, we can help these banks partner with fintechs and offer new service lines for them so they can quickly beef up their portfolio of banking services with new capabilities and make things more efficient for them. And on the bigger banks, you're complementing big bank service. Right? Large banks have been leveraging banking as a service, again, to simplify their operations. Migration from legacy system's certainly a big hot topic in that space. And then come up with new customer propositions rapidly. And banks five years ago, that was always the rise in the threat of the fintech that was going to eliminate banking as we know it. Well, that certainly hasn't happened, and we're seeing the rise of platform banking, right? Banks are now platforms and they want the ability to bring in best of breed solution sets so they can innovate and offer a new solutions in market to create that differentiating experience for their customers as well.

Erin Dangler:

I love that you talk about we can stay in the innovating phase. When I was researching and prepping for this, because I had no idea what this meant. I see these acronyms, capital I, small A, small A, S, innovation as a service.

Adrian Sturley:

It's a really hard one. I just say innovation.

Erin Dangler:

Innovation, okay, great, because I saw a flow chart, which made total sense to me as far as process. You start with the inspiration, you ideate, you plan a roadmap, you have a blueprint experiment, and then you execute the experiment. And then what Jason mentioned is you either drop it or scale it, right? And then move on to the next thing, and then you use it. And you're talking about this rapidity at which it needs to be implemented. And why is it difficult to quickly onboard these services currently? What are the roadblocks?

Adrian Sturley:

The way I see this is the engagement with especially financial organizations, which are well established, have very, very strict policies, risk management layers that will try and ask you to do things which you are just not prepared to do. So you can quickly get dragged in down into those very detailed minutia of policies that big organizations will have. The same goes for banks. Some of those operational activities are also more difficult. So you need to be operationally aware when you're executing. You need to be operationally capable when you're actually dealing with an organization.

So at the moment, it's quite a challenge for fintechs to get into those organizations and prove the execution in any mass scale. So if we can help them with that, then that helps that whole innovation service become an end to end process rather than technology processes, et cetera. So that for me is the difficulty they face, but what we're trying to he help them with and achieve in FIS.

Jason Williams:

I would also say making it difficult is the shift, especially in our space and how traditional players like FIS have kind of gone to market. Traditionally, our delivery has been very bespoke when it was delivered in a very custom manner to those banks and those organizations that we traditionally defined as our customers. When you start thinking about delivering to banks and non-banks entities, how do you make that easy? We've seen the explosion in APIs in the last few years that make integration easier, but you still have a lot of touch points, such as operations, regulatory, customer communications, back office servicing that make onboarding a challenge.

So our design goal with what we're kind of doing within FIV is that any service that we're kind of bringing to market and we want to enable that end to end business function that gives the banks or the fintechs across any industry the ability to kind of rapidly configure new financial service offerings by delivering those banking and payments products in kind of that as a service fashion and, again, pressure test rapid innovation, deliver a low risk pay as you grow model to allow these guys to take on innovation and be comfortable with launching new offerings in market.

Erin Dangler:

What I hear from both of you is that this innovation, the nature of the word innovation means change, and people are often fearful of change, and especially when you're dealing with the red tape, that can be a roadblock. But why is speed so important with innovation?

Adrian Sturley:

I think from my perspective, because we are the ones that are driving it. We want things faster. I think we are the same with financial services, we're the same with everyday life. We like to have four or five different types of as a service plays. We like to watch Netflix, we like to watch Disney, and we'll pay for those services and we want them on demand, but they better be there straight away. They better be there quickly. We expect our broadband now to be fast as ever and no stop and no interruption, and financial services are going the same way. And so from the UK perspective, we've been kind of running with that for a number of years now in the banking world where it's getting faster and faster, more on demand, more capabilities that we want immediately to compete with everyday life. So partly we are driving that, from my perspective. And unless you do that, you can't keep up, you'll get lost, you'll get left behind.

Jason Williams:

And I think the concept of where we used to be where you'd talk about a five year roadmap, people are now talking about agile speed to market. We need to be delivering in sprints. So your five year roadmap, the expectation now is you're delivering that five year roadmap in three years, and how do you go do that? The ability to rapidly stand up infrastructure is now commonplace in the financial services industry. Five years ago, people, the banks weren't even talking about cloud. Every bank now has a cloud strategy and the expectation that they can stand up infrastructure. If you take that one step further, my expectation is now infrastructure with services around it, executing on specific functions, whether it's payments, account opening, money movement, insurance, anything like that. So the expectation is you have a solution that you can stand up in market and can be integrated too quickly.

Erin Dangler:

Great. Yeah, that all makes a lot of sense. And before we continue on in the conversation, I want to backtrack a little bit. You had talked about FIV, the tech stack. Can you just explain to our audience what that is because we're going to be talking about that more, and for me it's a little bit kind of like Greek.

Jason Williams:

So what we've done is built the FIS Banking as a Service Hub. And so from a technology perspective, there's two features to the Banking as a Service Hub. The first part of that tech stack is what we call our content surface. So think about taking the APIs from FIS's back office systems and transforming them, routing them, orchestrating them, and delivering them out to market in what we call content packs. And quite simply put, a content pack is that business function, open an account, pay a bill, move money. So that content service helps us kind of extract that business function and deliver it as a content pack such that our customers can take it and embed it in their online banking, their brand apps and expose it.

The second part of our service hub is what we call the feature surface. Think of that as, using air quotes here, "pre-done widgets and developer kits" that you can take a pre-fabricated pre-built application and embed it easily in your digital channel very quickly. And I think probably to call out too, one of the differentiators for us is it's not just simply APIs. We deliver from API to back office, offering a turnkey solution such that fintechs can take on that business function without having to build out their operations teams, without having to go staff up regulatory personnel within their organization. So I think that's a real differentiator for us.

Erin Dangler:

Innovation as a service isn't just about brainstorming pie in the sky ideas to come up with the latest trendy tech. It's about identifying real world issues and developing a complete package, from coding to implementation, to create a turnkey solution. And in the rapidly evolving world of FinTech, there's no shortage of challenges to overcome.

Adrian Sturley:

I've got some use cases and we've spoken to a number of our fintech partners I know getting into the market as a whole on a mass enabled scale. So mass enablement is important for fintechs so they can have that growth they need, but being supported by an organization that has scale itself. So it's almost utilizing these larger organizations like ourselves as the machine to help with growth and scale. That's one of the big things from that perspective. And the platforms we are creating are designed to provide that capability of offering that scalability into our existing clients, into our new clients, and bringing them through these platforms that allows their solution to be exposed into that marketplace and that framework.

Also, Jason mentioned having the business support functions. Often or not fintechs will need to partner with a number of players to do things like embedded payments, to do things like open accounts, to have those base functions and operational support that lie behind the offering of the business function they might may want to have. I think earlier on we spoke about innovation's not necessarily about the business function, it's also about the actual support functions and the operational functions and the execution functions. So having someone to able to help execute in a bigger scale and help grow in that scale when you're trying to bring this solution forward, embedding it with supported services that lie beneath so that you're not having to go out and find huge numbers of partners bringing itself together, lots of integration projects that you need to do before you even get to the execution at the client.

Now, if we can provide those, and that's what we're trying to do, we can provide all those base functions and regulatory provisioning, then that helps these fintechs then expose their capabilities into a mass market. So we are effectively helping bring scale. We're bringing those base functions that support functions, the regulatory functions to help some of the challenges they face today by getting into that mass enabled world, which helps them get growth.

Jason Williams:

To build on some of those points that Aid brought up, helping them with customer lifetime value and retention. When we talk to these fintechs, they go to market very hyper focused on customer experiences and they've developed what they feel is the next greatest thing in whatever vertical they're in, but a lot of them recognize that the customer they start with day one isn't the customer they're going to have day 365. And so how do you adapt your service offering? And in some cases when you start talking about, I'll give you an example in the digital or the neobank space, right? A lot of them come up with the next great account offering. But that account offering that, again, your customer starts with day one, might not be the count offering that they need day 365. So the ability to bring new offerings to market quickly and really allow the fintechs to operate as a platform where they can bring on best in breed solutions to meet their customer needs at speed is I think one of the challenges that we can help them overcome with innovation as a service.

Erin Dangler:

Is it available to everyone? What is your work doing to make innovation more equitable?

Jason Williams:

To make it more equitable, especially within our work within the financial services space, I think what we're doing here is opening up services that have historically been difficult for fintechs to access. Certainly in Europe and Asia, opening up the financial services markets has been, I'll say, commonplace over the several years, but it hasn't in North America. So in the North America market it's about opening up those financial services and make them easy for fintechs to integrate and consume with and, again, have that operations and that heavy lifting in the back office process that's taken care of from a trusted partner like FIS. I think that's kind of where we're making it more equitable. We're mass enabling fintech, our financial services products to really almost any vertical, and so not making it just the exclusive domain of banks anymore.

Adrian Sturley:

Yeah, I would add that part of what we are doing here in FIV, we've had an accelerator now for the last six years. We've taken 60 companies through that accelerator. We find ways of being able to expose their business capability outbound into the wider FIS, and that's part of our FinTech advocacy job and trying to find those roots and avenues within the large scale FIS organization where they can help FIS, of course, but also help them. So part of that innovation as a service is designed that we can allow them to grow inside the FIS client space by exposing that their functionality into different clients and then different areas. And of course, by allowing them then to use FIS capabilities and services underlying some of those things, it's a more rapid way of then exposing into our client base. So it's helping us because it's helping us get to new target markets. It's helping them because they get to existing client base and be part of that journey to our new markets.

Erin Dangler:

Innovation as a service is revolutionizing the way consumers access financial products and helping banks large and small to augment the services they offer. And innovation isn't just there to solve issues surrounding existing capabilities like money transfers or debit card services. It's being used to serve new markets and tackle emerging issues too, most notably bringing crypto into the mainstream.

Jason Williams:

If you think, oh, three, four years ago, crypto was this off to this side, fringe type decentralized currency running on the block, and again it was fringe. It's now I think moving mainstream where we have banks that are basically saying in response to customer demand we would like to start offering crypto type services or even partnering with some of these crypto firms to help them grow. So we're seeing kind of demand in the ability for banks to offer crypto. And so offering things like crypto type accounts or cards that can spend in different cryptocurrencies and function in different type of crypto wallets. So to that end, that's what kind of we're seeing there, is kind of that merging of the two. And so innovation as a service helps bring those traditional functions. So the fiat accounts, debit cards, writing traditional rails, and then taking next gen type defi technologies, such as crypto and blockchain, and marrying the two to create, again, those differentiating experiences, such as crypto debit cards, to market.

Adrian Sturley:

I would also add what's really interesting in this area is some of the DLT technology, digital cash that we're seeing in various different countries and undergoing some regulation, which is interesting as well. I think there is a paper out at the moment with the government in the US around the regulation of crypto, but we are also seeing this in conjunction, the rise of this distributed ledger technology and the digital cash elements of that, understanding how that's going to interact between governments and countries and consumers. So there's some exciting areas in this space that we'll see innovation happening in front of us, and what we want to try and do is provide some of those backbones of being able to have cars and accounts and move money so that these innovations can take place with our partners and provide that next level and next generation with moving money across the world.

Jason Williams:

We've had conversations with very, very traditional payment providers in the US and they acknowledge that the shift is happening, that you're going to have non-traditional payment rails standing against traditional payment rails. And everybody's now saying these new next gen technologies, such as DLT, crypto, moving money, not using traditional payment rails, is going to be kind of the next wave of innovation that we're going to see in the market. And so a lot of them are looking to FIS and looking for that trusted partner to say, "Okay, how are you guys thinking about this? What kind of solutioning can we do together to bring something to market?"

Erin Dangler:

And let's build on that because that's a perfect segue into the next question. And so somebody's out there and they're looking for a partner, what do they look for in a partner? And then briefly tell me the process.

Adrian Sturley:

We've got various different partners, whether they come through our accelerators and we are mentoring them through the process of being with FIS or whether they're direct investments from our perspective or partners that we've gathered. We want to make them successful in their own independent way as well as being successful within the FIS world. Innovation's not just necessarily to the end consumer, it could be within the industry itself. So some of our partners will be innovating within the banks that we have as clients. One example is providing partly the lending as a service capability, but around loan participations that is very much dedicated to those organizations that participate in loans to free up their balance sheet. That allows them then to offer loans to consumers and offer new lending types of services to consumers because they're able to then grow. It also helps them grow themselves because then they've got more lending capabilities.

Those partners may start at a referral kind of relationship. They could be a reseller relationship. And we are pretty flexible actually in how we do that because we recognize there are different types of needs of the partners that we have. A lot of them still want that entry point into the scalability in FIS and the clients that we have in FIS. So we'll have different flows for the types of organizations that want to act differently, whether they want us to be a reseller, whether it's a referral type of range, whether it's a heavy combined partnership where they're embedded in the technology that we are providing or it's a more loose partnership. So it really depends on the types of organizations and we are pretty flexible on how they want to operate and how we want to operate with them to provide that innovation inside organizations, as well as to the end consumers via the customers that we have.

Jason Williams:

And to build on Aid's point on the type of customer, I always view it as kind of three things when people choose us to innovate with, right? Is our ability to innovate solution certainty and stability and risk. From a bank's perspective, ability to innovate, right? We've been innovating in this space for a long time. We've now said that market has exploded and how we're taking on more of a platform approach with our innovation and we're going to be looking at strategic partners to bring on board.

That also then leads into kind of that solution certainty. So FIS, we deliver. When you talk to the banks, we don't fail in our deliveries. Certainly we've been late, maybe there's rough patches, but FIS delivers, so solution certainty, and then stability and risk. We've been doing this for 50 years. So that's very appealing to traditional FIs.

On the flip, when you talk to fintechs, again, ability to innovate, right? Bringing on platforms that allow these fintechs to get into banks that they've never actually been able to get into due to their risk profile. But FIS, when we recognize the value that these fintechs could bring in certain verticals, when we stand behind that solution, delivering that solution certainty under the FIS brand, that stability, that reduced risk profile, I think that's how we kind of stand above and how we can help people hopefully select us to partner with and help drive innovation with them.

Erin Dangler:

So with where innovation is now and with your experience, it sounds like there's already so much going on, innovation keeps innovating. So what do you see for the future. In your own words, we're not going to hold you to it, but what do you see?

Adrian Sturley:

I think from my perspective, it's a conjunction of services that meet an overall consumer's needs. We still have isolated functions in the financial world at least. We do insurance over here, we do banking over there, we've got wealth up there. We need to start to see all that coming together. So not just from an aggregation perspective, but from an operational perspective. We can quickly manage all of these things in real time. We can make investments in real time, we can do insurance in real time. And if you ever think about insurance contract, it takes ages to get one. Those things need to improve, as well as real time banking, et cetera, so that everything we can do in a real time mode, everything becomes easy to do. Just like you can buy Netflix and watch a program immediately after you've subscribed to it.

So you'll see that subscription based activities go across the chain from everyday consumables into the financial world. And I think that's when this really gets exciting from an innovation perspective, because then once you've got that cross capabilities, you can just imagine the way that we're going to be able to move money, imagine the way that we're going to be able to get new services and get insured for those services as well. Pretty exciting times if we can get to that point.

Erin Dangler:

How about you, Jason? What's your vision

Jason Williams:

30 second elevator pitch. It's that creation of that platform for really anyone to build that banking and payments ecosystem that is purpose built for their needs. And it's really about being able to select a best of breed function that you can quickly integrate to and have, again, run end to end in an as a service mode. So from API to back office in a pay as you grow type fashion. It's that pick and choose platform to build the banking and payments ecosystem that you see fit.

Erin Dangler:

Adrian Sturley and Jason Williams are vice presidents of Impact Ventures at FIS. That's it for today's show. Thanks for joining us. We'll see you next time when we'll be taking a look at the next generation of fintech to identify some of the megatrends influencing the industry over the next decade.