The Global Potential for Banking and Fintech Collaboration

Jim Marous:

Hello and welcome to Banking Transformed, the top podcast in retail banking. I'm your host, Jim Marous, founder and CEO of The Digital Banking Report and co-publisher of The Financial Brand. We're coming today from The Financial Brand Forum, the largest event in retail banking. FinTech has transformed the entire financial services industry rapidly and has blurred the boundaries between what is a traditional bank and what's a FinTech. What once is driven by physical structures is now driven by digital engagement. Technology is more important, but leadership still is the most important component as to whether or not you're going to be able to change to where the consumer's going. Countries must embrace the opportunities that FinTech provides while still understanding the regulatory boundaries they have to set for this new realm of financial services.

My guest in The Banking Transformed Podcast today is Jeremy Quainoo, country operations director at Jumo. Jeremy's going to be discussing the opportunities and challenges facing FinTech firms globally and how marketplaces must evolve to meet the needs of today's consumer. So Jeremy, yesterday at The Financial Brand Forum here in Vegas, you covered a ton of ground as you shared about your perspective on the future of FinTech and in banking in general. But you also talked about the opportunities, the challenges, some of the trends that are impacting the overall industry, and you're also doing it from the perspective of a leader of a FinTech firm that has its foundation in Africa, in Ghana.

It's interesting because I mentioned to you that I was fortunate enough before COVID to visit different parts of Africa, which, like the United States, you go to different parts, are vastly different. South Africa and Northern Africa, where you're from, is vastly different than each other. But Africa is a country and how they embrace financial services is also different. So can you explain from your perspective, knowing how the rest of the world works, what is different about Africa with regard to financial services and then also as FinTech?

Jeremy Quainoo:

Yeah. So I think it's a brilliant question, [inaudible 00:02:23], and I'm actually happy that you've actually experienced the continent. So initially, I would've said that Africa started off by trying to take what was happening in the West and basically photocopying it for the population. But as time goes by, you begin to recognize that the consumer is totally different. If you look at the statistics, globally, there's about 1.7 billion people that are still unbanked, don't even have access to a bank account. If you bring that to Africa, 45% of the continent, the adult population does not have a bank account. And it's not as if having a bank account is revolutionary in itself. But once a person has the bank account, they have the advantages that come with it, even the dignity. Because people do worry about things like, how do I afford education? How do I handle emergencies when they pop up?

So providing access to financial services does do a lot for the consumer. So you first have to understand that this person that you're serving is very different and that their problems are uniquely different. So the banking system has had to adjust to that. So the reason why we employ what is called a fidget model is you have a physical presence because they are still people that need to be handheld. These are consumers who have never engaged with financial services. Because if I'm going to go to a bank to ask for a loan and they're going to ask me to come with 16 different documents, I don't have these things and I can't even read those documents. I don't have the kind of collateral you're asking about. My best experience of an investment is a goat or a cow. That's how I keep money and that's what makes me money. So you have to now think through and say, "How do I bring this customer on board? What are they using?" And that's why the proliferation of things like mobile money has become such a driver in financial inclusion.

So banking in Africa is tailored to the needs of this unique customer, and that's how it's different from the rest of the world. And I assume that in other parts of the world, it has to be tailored as well. But the African consumer has needs that require you to be creative in your delivery of financial services.

Jim Marous:

Well, it was interesting, because as I discussed to you, one of the first impacts that I had was the fact that, as you mentioned, payments really is the foundation of all the banking in Africa, as it is in South America, as I've recognized. And that it wasn't just access to it, but many people didn't trust the banking system because it was considered to be tied to the government. If you can avoid the banks, you can avoid paying taxes, you can avoid a lot of things. And it was interesting because back a decade ago, many of my listeners probably have heard of at least, MPASA. MPASA, I think from a lot of the Western organizations, thought it's just too simple. It's just a flip phone and it's a payment app that could be used everywhere. What is interesting is we thought, well, we have just more valves. We're much more advanced.

In looking back, the advancement of technology now has made it so we're trying to get to be as simple and fast as MPASA with all the banking, something that can be done on a flip phone, something that can be done on a tablet, something that can be done on a smartphone or by voice. And it gets down to conditioning the financial services to the audience you're trying to project it to. But there's still a need. And you mentioned about the unbanked population. Many of those people didn't want to be banked. Some of them couldn't be banked. But just as in China, the availability of little parts of data change the way you address the consumer overall. So let's go back a little bit and talk about your background, now that we set the foundation of where you're from, your background in banking and also a little bit about Jumo.

Jeremy Quainoo:

Sure. So I started my career a little over 10 years ago. I started in banking, started with a short stint at Barclays, and then moved over to Fidelity, which is a local commercial bank.

Jim Marous:

And those were both in-

Jeremy Quainoo:

In Ghana, yes, in Ghana. So my journey to Fidelity, I like to say I was fortunate because I started off in corporate, so I got that experience, but then I became a management trainee. So I got the benefit of rotating to several departments. So retail, technology, operations, treasury. So I've got the full suite of what banking looks like and what banking aims to do. And when this whole drive for digital transformation started and the banks started creating digital offices or digital transformation units, I got assigned to it because I had displayed an interest in what came next in the realm of financial services. But I think it's in that journey that I recognized that the pace at which financial services and the consumer was changing was faster than what the banks were trying to achieve. The banks were just lagging behind a little bit, and that's when I was introduced into the concept of FinTech.

So when the opportunity came to jump to FinTech, which were being very specific about addressing the needs of a consumer in an innovating way, leveraging technology, I was like, "This is it." You can't predict the future, but you can tell that this is where the trends are showing, this is where the trends are leading. And Jumo was one of the companies that were doing things that made you want to be a part of it, made you want to be a part of that mission. And so it was a no-brainer to jump ship from that point on.

So what Jumo is is a FinTech, and FinTech essentially is the application of technology to finance. But Jumo is unique in that we have a platform that is built on two main pillars. So on one aspect, we deliver end to end or next generation, end to end technology, that goes alternative to the high fixed cost models that is traditional banking. And then we also have a learning machine that is able to leverage alternative data, so a customer's digital footprint on their mobile phone, to be able to predict their risk and lower costs so that it brings as much value to the customer and to the partner as possible. So as we said earlier on, this is a customer that doesn't have any financial history, and they can't fill 16 page documents. They can't afford-

Jim Marous:

Show mortgage.

Jeremy Quainoo:

For example. But we're saying that, no, or you do have background on your mobile phone, you do have a digital footprint, and this tells us a lot more about you than you would've told us in your 16 page document. Plus, we are able to partner with banks and large payments providers, in our case mobile network operators, to say, "This is a segment of the population that you did not want to attempt to bank because they were risky. They were considered risky. We have found a way to be able to score them that is substantially more improved and advanced than what you currently do. If you give us a try, we will make sure that we are able to achieve your goals as well." And so far, we've been successful at doing that. And so Jumo's mission is simply to provide access to good financial choices for people who [inaudible 00:09:24] were unbanked or underbanked.

Jim Marous:

So you've on the research really, that the traditional financial institutions really don't have access to, in many cases because they wouldn't look at alternative data. It's interesting. As I've talked about many times, I was for enough to go to Shenzhen, China in the early part of 2020 and visit WeBank. And their whole platform, their digital platform has been built around the same thing you talked about where they have millions and millions and millions of customers, the biggest digital bank in the world, but it came from the same foundation where they said, "We can take mobile data and we can not find the best customers, but we can eliminate what will be the worst customers."

And they know where the risk level gets to the point we're going, the phone's gone place where the person isn't, or they haven't made payments the way they normally should, or they haven't made their phone payment in many cases. And all of a sudden, they're using alternative data to reach out to billions of customers that they want to have reached out to anyway. So do you see the future of FinTech then being more of a standalone organization or more like yours where you're actually partnering with traditional and even other FinTech, but other organizations? Do you see the collaboration model probably being the future of how this is going to roll down the path of going forward?

Jeremy Quainoo:

I 100% believe so. I do not think the person who is going to win the game is... I don't think it's a zero sum game. I think that even though people tend to predict and repeat the quote that there's going to be a world where there's banking and no banks, I don't think that the banks are not aware of this. And if you observe recent times, they're now beginning to recognize that they want to do banking. The technology aspect to an extent actually scares them because every time you turn on the news, it's a different technology that is being predicted to disrupt your industry.

But what you are good at is the credit underwriting, managing risk, and now you're being forced to do this whole technology aspect and go into blockchain and AI and all of that. Increasingly, the banks are beginning to recognize that let's focus on what we are good at and let's bring these new players on the block who seem to be better able to understand this new customer and their needs, and they seem to be able to use technology in a way that is either a power superior to what we do.

So the partnerships brings value, because one, they don't have most of the time, the balance sheets, they don't have... That one of the biggest challenges for FinTech is being able to scale, being able to achieve profitability. The banks are good at that. They've done that. So you bring those two together and they say, "Well, we have flexible platforms that are able to reduce the per unit cost, are able to understand what actually customers value, and what we need from your side is the strategy, the goal, the balance sheet and we'll be able to make something that brings value to all parties involved." So that collaboration is going to be what wins. It's going to be an ecosystem that grows and grows to include a lot more players within that financial services-

Jim Marous:

They really do need each other.

Jeremy Quainoo:

Exactly. Exactly.

Jim Marous:

As you visit traditional banks and try to sell the services and capabilities of Jumo, what are the challenges or the pushback you get? Because you're being invited in because people are interested in what you do. But once they hear about the stipulations, what they have to accept or what they should accept to get success, what's a hesitation from the traditional finance institution and what gets in the way of that partnership working?

Jeremy Quainoo:

Mm-hmm. That's a brilliant question. Where do I start? There's so many challenges. I think one of the-

Jeremy Quainoo:

Where do I start? There's so many challenges. I think one of the biggest things is talking past each other when it comes to what the ultimate goal of each party is. So for example, and I'm biased to using Africa as reference, a number of the traditional banks welcome FinTechs in in the name or with the theme that we want to promote financial inclusion. However, you have to read between the lines to understand that, yes, they do have that altruistic intention. However, in order for this to be something that they're going to be able to continue to sustain, it has to make profits. So if you are thinking, "Oh, this person just wants to provide eligibility to a number of people who are outside the financial service," and you don't zone in on the fact that they want to provide eligibility and include as many people as possible, but they also need to go back to their board and show them that this is profitable and hence it's sustainable. We won't keep coming back to you to ask for more-

Jim Marous:

It's not a charity.

Jeremy Quainoo:

It's not a charity. So they might say, "We're not for profits," but they're actually not for loss either. So you have to understand that. The second thing is just getting them to understand. Just getting them to understand the technology. Just getting them to understand that this consumer has to be served differently. Sometimes they come in with expectations that you're going to start preaching about machine learning and deep learning and alternate credit models that are doing back flips in the air. But you tell them something as simple as what you just made reference to that, well, we're delivering this service using USSD. Now, USSD is a 50 year old platform, but that's on what [inaudible 00:14:43] has been built. The simplicity, the ubiquity, the ease of use, the less friction, a customer or consumer does not need someone to stand and help them navigate when they have to just type *170# to access a financial service.

So you tell them, "Well, this entire platform is predicated on USSD," and it's almost like, "Oh, that's too simple. Are you sure it can do what you're saying it can do?" But the backend is where all the magic happens. And getting the bankers to understand these kind of dynamics becomes difficult because in their mind they're used to branch, brick and mortar, traditional credit scoring models, the Six C's of credit, and now you're bringing in alternate ways of doing things. You're talking about the digital footprint. It's really about managing the expectations. And then the aspect comes in of them always worried that you're about to usurp or take over their market base. So it's almost like we're partnering with you, but we are keeping an eye out for you as well.

Jim Marous:

There's no trust.

Jeremy Quainoo:

There's no trust.

Jim Marous:

But at the stage I'm talking about, you're just dating anyway, so it takes time to establish that trust.

Jeremy Quainoo:

Exactly. And they have lost an element of trust that they used to have because of all the things that have happened in the financial services sector. So you are coming in and you're trying to... And it's a very delicate balancing act when you're trying to manage those kind of partnerships. And apart from just providing the technology, you now have to manage the relationship, because in JUMO's unique case, we're not only partnered with a bank. We're partnered with a mobile network operator. Now these are two huge [inaudible 00:16:14] of companies that have their own ego and they have their own goals. The bank is looking to make profit, the telco is looking to bring on board as many customers as possible, make these customers sticky. Now you are the tiny FinTech in the middle that is having to manage the relationship between these two parties and find that sweet spot where their strategies and their goals align. And you have to display that your technology actually works and can do what they're asking for-

Jim Marous:

At scale.

Jeremy Quainoo:

... at scale, before they begin to ease up and begin to understand that this collaboration actually can bring value, not only to the consumer but to all parties involved.

Jim Marous:

So along the same line, a FinTech's operating model is speed, simplicity, and iterative innovations, where everything's very quick. When you then partner with a more legacy firm, they're not in that legacy environment, have anywhere near the speed of innovation. They don't look at incremental innovation in most instances. I'm making broad brush here. How do you bring them along so that they don't slow you down, because your speed is a lot of your value proposition.

Jeremy Quainoo:

Exactly. So it's a challenge that you really have to think through in order to come up with a solution. Using JUMO as a use case, we identify that one of the reasons why traditional banks were not going into this market of the unbanked population is simply because their platforms were not built to sustain or carry the kind of transactions that millions, potentially a billion customers, would be doing. And these are tiny amounts, large transactions. So we basically said, "You don't need to use your platform. We have built a fully next gen, end to end banking platform that is flexible, that is scalable, that is based on the cloud, that allows us to be able to handle all of these transactions for you so you can focus on what you do at the core, and then we will handle all of this operational backend that you don't want to handle."

Once they see it in practice and they see that, "Oh, this guys can actually do it." They don't want to go and explore how AI can increase their efficiency and all of that, but we will do that quickly and come and say, "These are the results." So then they get the confidence because we've basically been the experimentation bed or the nursery for all of these things that they don't want to go into. It's only in that manner or using that approach that you're able to get that buy in and that confidence that they come to the table and they recognize that, "Let's not clip their wings, let's allow them to flourish because at the end of the day we see the results."

It's easier said than done, and it does take a lot of time and it does take a lot of relationship management in order to build that trust, but eventually, once the results begin to show. For example, in tough economic times when everyone is going through it, if they can see that, "Oh, these guys are able to keep their costs low, they're able to continue scaling despite the fact that winter is coming, the fact that winter is here," then you begin to see that the partnership is beginning to work. And then the confidence builds and then they allow you the flexibility to grow.

Jim Marous:

So one thing I talk about in this podcast quite a bit is the importance of the right leadership to allow change to happen. As you are trying to knock on doors of financial institutions and core providers on selling JUMO, how quickly can you usually tell whether or not this is going to be an easy implementation or a tough implementation just because the leadership? Because a lot of times everybody says the right things, but most organizations have gotten to the point where they know what questions to ask, to say, "These people have not done the basics." I mean, is this something you can sense really quickly?

Jeremy Quainoo:

So personally, because I've been in the partnership space for quite a while, it's easier for me to ask the kind of questions that lets me gauge the kind of leader I'm speaking to. In my presentation, I spoke about being curious, not judgmental. As soon as you start speaking to a leader, be it a financial institution or a mobile network operator, or a payment system, and you begin to see that there is this wall of judgment, rather than asking the curious questions to know if it aligns with what you're trying to achieve or not. I've had a leader ask me... I could tell that he didn't fully understand what FinTech at its core was. He assumed we are what is called a savings and loans association that had gotten a technology platform, but he wasn't directly asking the question.

Jim Marous:

Yeah, right.

Jeremy Quainoo:

He was basically trying to negate what you're trying to say you can do. Now, right off the bat, you can see that you're not going to make a lot of progress with this person, because one, they're not being open minded enough to understand what you're presenting before them. Two, they're not communicating their strategy and what they're trying to achieve. They're really being shielded about what we need you to come and help us with. So you can tell that this person is still thinking that we are in competition with each other and it's not at the point where he recognizes that we can collaborate.

But then other cases, you also do have people who are super excited right off the bat. They want everything and a bag of chips, and it's up to you to be able to settle them down, to let them know what's realistic and what's not. Because if you over promise and it comes down to what the delivery is and they're not able to go back to their board and say, "We're able to deliver this even though we asked you for a billion," then that partnership is going nowhere. So it's sort of a balancing act in trying to identify these personalities, as well as being able to sell the technology and the promise of the future in such a way that they do get excited about it, but within realistic context.

Jim Marous:

So if we were to have this interview a year ago, the answer to this question would probably be different than it is today, because a lot has happened last year, having nothing to do with Covid, but having to do with the economy. A FinTech organization today, anywhere in the world... What's interesting is, one of the reasons why I wanted you on this podcast, you're a continuous learner. Very quickly I knew it wasn't that you just knew what was happening in Ghana. You have a thirst for knowledge about what's happening elsewhere. What do you think is the biggest opportunity, unmet opportunity, that FinTechs need to answer in the near future? In other words, where's the gap? Because we're seeing a lot of FinTechs fail. They never got the scale, their funding's gone. But what are the pockets that you see, and maybe it's what you serve, maybe it's the underbanked or the unbanked, maybe it's the people that are the unreachable based on traditional things, but what do you think it is?

Jeremy Quainoo:

Yeah, so I think it's a number of FinTechs are in the payment space, are in the remittance space. I think that is well and fine, but if you just take a step back and look globally at the numbers, you have 1.4 billion people who don't have access to financial services. You have 45% of adults in Africa who don't even know how to operate a bank account, don't even know how to access that. Just going by the numbers alone, you can see that this is a lot of people. This is a really big market. And so the issue is not the demand. They do want access to financial services. The issue is that those that can provide a supply don't trust these people. So I think that FinTechs can come in to sort of bridge the gap between the unbanked and those who have that supply. Right?

Also, another gap exists where the people who have the resources are not daring enough to try out these technologies. JUMO is run by a revolutionary leader. I like to say that because Andrew is bent... His mission... He basically has this... How would I say? He believes that access to financial services is a fundamental human rights and financial exclusion is simply unacceptable. And he's been on a journey to leverage technology to make sure that he can bridge that gap. However it has happened, by being willing to take those daring risks. For example, what we do at JUMO would not have been possible five years prior because the technology infrastructure was simply not available. Something like the capability of storage of the cloud, which is what our platform is based on, was simply not there.

That means that as soon as the technology became available, you had to quickly start experimenting, be able to see how you can build a business model around this, how the use cases apply, and trace it back to how this is going to benefit the consumer and this is also going to solve the issue that the banks need to have, but don't know that it's an issue. Then you package this as a bundled financial suite of services and say, "This is what we can do for you. This is how we're going to bridge the gap."

In Ghana for example, only about 20% of the population is banked. That means you have 80% available for you. So I'm coming to you and I'm telling you that there is this population that is higher volumes, higher numbers, and could make up three times what you actually have. Now we have this technology suite that is able to do that for you, and you have to come to the table. And I think if more FinTechs were thinking about it in that way, rather than running all the way, trying to get to unicorn status by just valuation, but actually providing value, that is when we'll see the impact of-

Jim Marous:

And actually building a business model to sustainable profitability wise.

Jeremy Quainoo:

100%.

Jim Marous:

This is not a charity that you're hoping... Let's wait for the next round.

Jeremy Quainoo:

Exactly.

Jim Marous:

So what you just described there though, let's say in the western countries, that same model though plays well because what you've built and what other really progressive FinTechs that built is something that works for the most basic levels at a revenue positive scenario, but it's the exact same parameters for the-

Jim Marous:

But it's the exact same parameters for those who are banked. And in fact, maybe more so because it allows you to look at different ways of looking at credit, makes it look at different ways of offering services that are at the very basic level very efficient, which makes it even more efficient at the higher levels. You're not given just a sub suite of services. You provide all services, correct?

Jeremy Quainoo:

Yes. So the entire package, and that's what makes FinTech complex and that's why a lot of people kind of have this apprehension towards it because you can't just say, "All I do is credit score. All I do is analyze digital footprints." It's basically a package deal. For example, at JUMO, whether we like it or not, you have to add on these value added services that makes the partners and the shareholders more comfortable. So everything from product design to the reconciliation to the treasury forecasting to the building of the infrastructure to the integration to the partnership management to the portfolio and asset management, you have to come with all of that. And that is not easy to accomplish and do well enough that you have these large incumbent institutions gaining confidence in you. It requires you to have world class talent. It requires you to have engineering capabilities that are flexible, that are fast, that are swift, because that's your value proposition.

So your flexibility and your ability to learn on the go and implement experiments, fail fast, fail forward is what these partners appreciate. So it's really a very delicate balancing act trying to achieve your mission and satisfying partners while also generating value for the customers.

And then you see this in different iterations all across the world. And as you said, the basic thing is you want to provide simplicity, value, ubiquity, access to channels of commerce that can scale. But you have to also observe the market that you're in. There's regulation you have to deal with. There's local contracts that you have to get through. So it's an ongoing journey and you basically learn as you go and make sure that even though you fail, you fail forward.

Jim Marous:

So before we take a little break here, your best case, your best case study, financial institution, it had decent size. How long did it take to implement what you're trying to do, because I know you're still B2B2C, so it takes three parties to work together, but what kind of time period are we talking about being able to implement your capabilities within it, within a traditional financial institution?

Jeremy Quainoo:

The best case that I've seen happen is anywhere from six months to 12 months.

Jim Marous:

Okay. So I'm going to stop right there. I want to make sure everybody heard that just happened. Because I talk about it on stage, I talk about it in my writing, I talk about it in my podcast, that it's about speed, that you can't say we'll do it in 18 month time period. We have the third, I think, largest bank in the country, in the United States that announced eight months ago, nine months ago, that they were going to come out with a brand new digital banking platform at the end of this year. And they had already been working on it for eight months. And I'm going, "It's just like nails on a blackboard," drives me nuts because you go that it's outdated before it's implemented.

But that you're really completely transforming the core operating system for a financial institution so they can offer more, faster, easier on a cloud platform. You're doing everything. And you found a partner that also had to work with your partner that can implement it in roughly half a year.

Jeremy Quainoo:

Yeah.

Jim Marous:

That's the aspiration we all have. Now obviously, when it gets longer, and what that says is when it gets longer, the onus is not on you because the reality is it's still the same service. It's on the onus of either the person who you sold the services to or the ultimate financial institution that kind of ... in American football, I say you give the ball to somebody, run down the field, then you keep on landing on the ground and breaking up the run. You need to think of things different. It takes a mindset and therefore it gets back to leadership.

Jeremy Quainoo:

100%.

Jim Marous:

Because if you don't have the leadership that's willing to say, "We're going to do things completely differently." And for me it's very much like the partnership between 10x and Chase in the UK where Chase did not say, "We're going to bring our own people and we're going to build a bank." They said, "We're going to find a partnership and build a digital bank." So let's take a short break here and have a message from our sponsors.

Welcome back to Banking Transformed. Today I'm joined by Jeremy Quainoo, the Country Operations Director at JUMO, a company out of Ghana, Africa. It's a large FinTech that is actually changing the way banking's done, not just in Africa, but has a message for organizations in any country. And he's a learning individual that's shown that his perspective on how their company relates to other things going on in the marketplace globally is really spot on.

So Jeremy, as you see the opportunities and you're looking at new technologies, what do you see as the potential use cases and opportunities that new technologies beyond what you ... You're deep into the cloud already. You're deep in the blockchain, I figure. What do you see as the future technologies that you're getting your hands on right now saying we got to be ready for that as well?

Jeremy Quainoo:

Yeah. It's really interesting because one, there's so many new technologies that are emerging. So how do you focus on which technology to prioritize, right? So for example, one of the things that happened recently this year for us was there was this whole drive to make sure that there's national identification. It's happened in many countries in Africa. But you realize the struggle that comes with that because yes, people get the card and says my name and I'm from this country. But when you try to tie that back to the database, you realize that there's siloed databases. So you never actually gain the value that you're looking for.

Now, one of the advantages that things like the emerging technologies, people know NFTs because of the pictures, the memes and things like that. But if you actually look at what NFTs bring at its core, it's a way to digitally identify, validate, and authenticate somebody who is either behind an avatar or in the virtual space. That has always been a challenge.

If you're trying to deliver mobile-first customer experiences, virtual experiences, totally immersive internet experiences, one of the biggest challenges, how do I know that this person who's calling himself Jim, is actually who he says he is? How do I know that this transaction was actually carried out by that person?

Now NFTs allows you to be able to track or that the functionality that overlays or underlies NFTs brings you that ability to be able to digitally identify and track and make sure that this person actually is who they say they are. And that's an interesting aspect that has use cases in many financial services and especially in emerging markets where that's a big challenge.

Right now people actually have to go to the bank to say, this is me, before they actually get a service. People don't want to go to the banks because they don't have that kind of-

Jim Marous:

And some of them right now because we haven't trained them very well don't necessarily want to be identified.

Jeremy Quainoo:

100%.

Jim Marous:

They don't trust the underlying technology. And actually when you look at the developing countries, if we get a universal identification process ...

Jeremy Quainoo:

Exactly.

Jim Marous:

It almost has to come out of the emerging countries because if you can sell to them, you can sell to anyone type thing. And it's not in a good or bad way. It's just these are people that don't trust naturally.

Jeremy Quainoo:

Exactly.

Jim Marous:

Big organizations, banks, or the government. So if you can give something that they can trust and understand in the most basic ways ...

Jeremy Quainoo:

Most basic.

Jim Marous:

And again, the power of the phone and technology that says, I can identify at least where I am at any point in time and I'm doing the transactions that align with what I've done in the past.

Jeremy Quainoo:

What you said is you're highlighting on a really, really important topic. And it's that element of trust. So one, people are apprehensive to giving so much information to an institution that they don't have any kind of real trust for. But in the same vein, you begin to notice that if you watch these guys and how they behave on social messaging platforms, take WhatsApp for example. People are so comfortable and have trusted WhatsApp to the point where they will take a picture of an invoice and send to someone else, right? They will take a picture of their bank account and send those details to someone else via the platform.

Now imagine if that platform that has the trust decided that why don't I start doing financial services? People will recognize that I already send financial information via this platform. And that is what the incumbent traditional financial institutions need to recognize when it comes to these new technologies. It's not really about what is flashy and out there and you just want to implement AI just because you're hearing it as a buzzword, but you're looking at what the customer is valuing. And he's beginning to say that I've sent financial statements via WhatsApp or social media, Facebook Messenger several times. And not once have I ever gotten someone saying, "I have the details to your account." However, I have gone to the bank and giving them my ID card, and I've been randomly receiving advertisements from people who are vendors of the bank. So how am I supposed to ...

Jim Marous:

They don't relate to who I am.

Jeremy Quainoo:

Exactly. Yeah. So how come a social media platform knows me better than my own bank? And it's in that sense that you have to identify that you first work back from the customer to the technology and, as you've said, and you've echoed several times, that it's really about the simplicity. So you look at, okay, this customer does not trust us. How can we be more transparent? How can we show that we are more secure? How can we show that it's open and is public? And then you trace it back to say, "Oh, that's what the public ledger technology blockchain can offer us. So how do we leverage a technology like blockchain to show customers that we're not who we used to be. We're now more akin to these platforms that they do trust and we can give them that same kind of experience?"

And that's where you have to start the thinking from, that mindset to meet the customer where they are and then work backwards towards the technology. Not decide that this is what we want to do, want to do AI, figure out how to make the customer buy this because that's just not going to work. And that's where we begin to see that FinTechs are beginning to be more empathetic. And that's been a theme at the conference that I've really liked where the empathy is the aspect that is important.

They've said several times that we are building virtual experiences that are functionally correct, but emotionally devoid. So you're trying to find ways to bring back that human element, and these are some of the ways that you do that, understand the customer's need, meet them where they are, and give them a wholesome experience that they can trust and build resilience around.

Jim Marous:

It's interesting you say that because this last weekend I've mentioned on one of the other interviews I did this week at the Financial Brand Forum is I was in a rural area of Georgia, state of Georgia, and I went to the bank to get some cash for a wedding we were going to, and there were 52 cars in line to get to the auto teller. There were no cars in line to get to the ATM, which would've been the same line. In addition, the people were lined up outside the door at the bank.

So when I finally got through that line, I had to ask the teller, "What's going on here? Does this happen often?" They said, "Well, we had a holiday Friday, so Saturday was a little busy." But she goes, "There's days that are like this the whole day." I said, "Why?" She goes, "A lot of people still have their checks mailed to them because they don't trust direct deposit," which is fundamentally the most basic transaction that's being done. And they don't necessarily trust the financial institutions or their government enough to say I want it all this way. They prefer in-person banking, even if they could do it in an ATM because they don't do the technology, which shows again, the element of trust, the element of meeting the customer where they feel most comfortable.

One thing that I saw when I was in Africa was the fact that M-Pesa is everywhere. It was just strange just seeing a VISA sign on a tent on the road. But that's what you're seeing with an M-Pesa.

Jeremy Quainoo:

Yes.

Jim Marous:

When you're looking at the whole transformation of the financial services industry, probably in South Africa or Africa and in South America, more than ever, they use retail outlets as being the quasi financial institutions. Is that something you see going to the western countries? Because for the most part in the United States you can get cash checks possibly, but it's not funded by a financial institution. Is that the new distribution, the figital as you mentioned earlier?

Jeremy Quainoo:

Yeah. So I think it's become more apparent and now that I've spent time here, I think where I'm from, we tend to assume that you're far more advanced than you actually are. But the truth is that as people, we're essentially the same kind of people. We value the same kind of things. So you will have people who still do not trust direct deposits and still have their ...

Jeremy Quainoo:

You will have people who still do not trust direct deposits and still have their checks emailed. We will actually have people who are semi-literate and don't understand how banking works at the core. So someone will go to the ATM, make a withdrawal, and come into the bank and ask them to deposit that money because he doesn't think it's safe outside. That is the lack of understanding. That's the level of the lack of understanding because he doesn't get... He thinks that's where his money is being kept. That shows the gap in how much the banks have not been able to educate such a customer. Now, we've become massively better. But you begin to see that the whole concept, and we call it agency banking, where you use tabletop sellers. You use we call them kiosks. We use shop owners as the trusted face for banking and financial services.

Jim Marous:

For digital platform?

Jeremy Quainoo:

For digital platform, right.

Jim Marous:

With no cost.

Jeremy Quainoo:

With no cost. Because these are the same people that these guys go to on a regular day anyway. I go there to buy my groceries. I go there to make inquiries. Now, if I go there and this person is not a banker, but he actually can educate me about these financial services and they're available every 400 meters, that is what the digital-

Jim Marous:

The retailers want that.

Jeremy Quainoo:

Exactly.

Jim Marous:

They're bringing in their customers for the bank insurances. They don't need much of a spread on it because they're going, "If I can get more traffic, I'm making it so they don't buy digitally."

Jeremy Quainoo:

Exactly. So it's a win-win if you look at it. I think that that model can be replicated because you do have people who also need to be ushered into getting that level of trust so that they do not have that same archaic mindset that banking is this exoteric thing that I really don't understand and they've taken people's money and never gotten them back. What exactly do they do with our money? Are they sure I'm going to get my money? But now you're introducing it into these liquor shops that is here around and to these tabletop shops that they go to buy bread, these people that they're familiar with.

These people are also being able to increase their volumes because now they've added financial services. I think that it's a model that'll work in several territories. I don't think it will work everywhere because some countries are more advanced, some territories are more advanced. But wherever there's that similarity because fundamentally comes down to building trust with the consumer and providing convenience for them, if the customer is more comfortable banking with his tailor or with the person who's on the corner that he buys food from already, then why not introduce that kind of model?

Because it builds trust and it leverages that innovation because, one, we've said several times that the best kind of customer service is self-service, right? But for some consumers, their form of self-service is yes, I do want to use the digital platform, but I do want you to be able to effectively hand me over when I do need help. So let me start on a digital platform, but make someone available for me where if I do need to ask a question of how do I actually get this money off the digital platform, that person can give me that boost or give me that advice. So I do think that is what is going to happen in many places.

Jim Marous:

Yesterday you were on the main stage. You did a presentation that anybody who builds a presentation knows that you're going to talk about a lot of topics, but you wanted to have one major takeaway. What was your major takeaway, what you wanted the audience to hear that was the impact you want to make on them? What was the last message, the takeaway message?

Jeremy Quainoo:

So considering that the people in the room were bankers, credit unions, and they were now basically dipping their toes into this pool of financial services led by FinTechs or what FinTechs we're introducing, my main message, and I've said it yesterday, is be curious, not judgmental. Try to see the world through the eyes of your consumer. Work backwards from the technology to the consumer and focus more on the experience rather than the technology. Those are my main actionable takeaways.

Jim Marous:

That's right on the money. That actually has changed so much, because with digital, if I'm not happy, I don't have to tell you anymore.

Jeremy Quainoo:

Exactly.

Jim Marous:

I don't even have to take my money out of the financial institution.

Jeremy Quainoo:

Exactly.

Jim Marous:

I'd just open another account someplace else that I do what I really want to have done and you've lost the bread and butter, so to speak, of what will be my relationship in the future as you go digital. It may not be the most profitable service.

Jeremy Quainoo:

Exactly.

Jim Marous:

But if you have a good digital background, it's going to be profitable.

Jeremy Quainoo:

Definitely. Definitely. I think one of the speakers said something I found quite profound, I think he or she said that one of the things that they've begun to observe is that it's not the customer that complains that you should worry about, it's the customer that doesn't complain.

Jim Marous:

Jay Baer.

Jeremy Quainoo:

Jay Baer, yeah, he said that. I really love that. Because he was like, "Now we're in a world where there's really low cost to switching. So if you are not giving me the kind of service that I feel I'm entitled to, I deserve, I don't need to say anything to you. You go on being whoever you want to be and people like me are also going to find that they don't like this and they will just go to the next person." I think it was a survey that was done by Ernst & Young where they said the younger generation is beginning to place FinTech services or technology driven financial services at the top of their most trusted brands list and now the banks are lagging behind.

So it's not enough to just give a consumer a good product or service. You definitely have to build the trust and make sure that you're serving them in the way that they expect to be served. Because you're having these experiences from social media platforms, from video games. So why is the person who is handling money, something so important, not giving me the same kind of experience? So we're beginning to see that global shift, and essentially I was trying to create the awareness for the crowd that this is the kind of consumer you're going to be serving and this are the expectations. So you need to have it in mind when you're formulating that strategy, when you're deciding what the goals for your institution for the next year, three years, five years are going to be.

Yes, there are some technologies that are going to take 10, 20 years to materialize, but there are some that in January will be just whispers, and then by December they'll take over. We've seen what happened with M-Pesa. So there there's going to be that. So you have to be curious but not judgemental in the beginning and then work backwards to what exactly the value proposition here is for the consumer and then how I can overlay that with technology that delivers that outcome.

Jim Marous:

I guess the other half of that is you're a learning individual. You've walked the floor. You've been here several days. What did you learn that was your aha moment, the thing that you said, "I didn't really know that that was being done or that's the way it was"? Maybe it was a solution provider who was offering and somebody said, "I didn't know that was out there." Or financial institution you met with that you're surprised by something.

Jeremy Quainoo:

So the presence of credit unions and how they function here was a foreign concept to me, and that the fact that there was a dynamic between banks and credit unions that almost seemed to be competitive but they understood each other was so strange to me. So I actually sat down with a few of them and they explained the model, being community focused, being membership led, membership driven, focusing more on how you can improve the lives of the people in the community. Even though you're not for profit, you're not for loss. You're trying to make sure that what you're doing is sustainable, and different from the bank in the sense that you're more people focused and in touch.

I thought that that was a very intriguing concept. I asked them a lot of questions. The way they structured their products was unique, right? I was making fun of people here saying that their interest rates are high because interest rates are between 5 and 7%. Where I'm coming from, my mortgage is 31%.

Jim Marous:

Really?

Jeremy Quainoo:

Exactly. The interest rates have shot through the roof. When they explained the way that the products are structured here, I realized that there is an innovative way that they're doing this, right? Most of the products, you basically have two options. You either get a fixed rate or you get a variable rate, but there's people who explained a certain model where they sort of sequence it. So you kind of have a term-

Jim Marous:

A five variable.

Jeremy Quainoo:

A five year. So you kind of have something to look forward to. So rather than having everybody running away from the interest rates, they now have the promise that at least the fixed period is for a period of time then I get to go to variable. You basically have advantages and that brings more people in. So it was very interesting for me to listen to these different dynamics and how they're... The concept of credit unions for me was basically new. It was very interesting.

Jim Marous:

Well, it's interesting because at the beginning of that, you said that there were both credit unions and banks here. While they're competitors and they have different models, they get along. That's one of the most interesting things I've seen for the financial brand form through the years, is that we used to as a publication that serves both markets, used to say, "Yes, the credit unions, we had mentioned members." Because those people didn't want to hear the word customers while banks didn't want to hear the word members.

Now, we talk about customers in a generic sense. We no longer have to do that. In addition, as you saw, they intermingle with each other and it's more based on asset size than it is on anything else, or maybe just the advancement of technology. It's very interesting in that most credit units are smaller than the representative bank in their marketplace, but they have a complete different mentality.

In fact, as the marketplace has changed now to be more empathetic, as you mentioned, more engagement based, they tend to, where they used to, I would say, I'm very biased, but lag in technology in the way they dealt with customer, actually have some more advanced model because it's based on the customers. So as a major takeaway, if you were to say to the crowd again, I do know how you ended, so maybe I already killed my thunder, if you have one recommendation that a financial institution should do in the next 12 months, and I could probably say in the next three months if I'm going to keep that speed thing, but in the next year, what's that one thing they really have to do?

Jeremy Quainoo:

I think that you have to make a decision in the sense that you have to decide the customer base you have right now, yes, they're probably the wealthy boomers that are basically making up 80% of your revenue, but at some point there's going to be that great wealth transfer and you're going to see all of this shift to a new generation of consumers. Are you going to just maintain your profits and be more myopic in the way that you're operating? Or are you going to now forecast outward and say, "In the next year possibly, you're going to see that transfer begin and these consumers have different requirements, different needs, different expectations. What are we going to start doing now to prepare us for these people, this new generation of consumers? Or are we just going to stay with what we know, stick with what we know and see how it turns out"?

I would say focus outwards, project and see what is going to be your future in the long term, and then decide today what steps you need to take right now in order to get there. So you need to make that, you need to sit down and actually ask yourself that question and make a decision. I think obviously the decision would be you need to be able to serve a customer who is different, who is more dynamic, who is tech first, who is digitally savvy, who has expectations because that's the world that we are going into. So reimagine yourself for a digital customer of the future.

Jim Marous:

Jeremy, thank you so much.

Jeremy Quainoo:

It's been absolute pleasure.

Jim Marous:

It's been a real pleasure. Thank you so much.

Jeremy Quainoo:

Definitely. Definitely. It's a pleasure for me as well.

Jim Marous:

Thanks for listening to Banking Transformed, the winner of three international awards for podcast excellence. If you enjoyed today's show, please give our show a five star rating on your favorite podcast app. Also, be sure to catch the articles I'm writing for The Financial Brand and the research we're doing for the Digital Banking Report. This has been a production of Evergreen Podcast. A special thank you to my producer, Leah Haslage, audio engineers Sean Rule Hoffman and Dave Douglas, and video producer Will Pritts. I'm your host Jim Marous. Until next time. Remember, while FinTech firms could be a competitive challenger, they also can be the innovative backbone for traditional financial institutions.