Former BoS tech head: Five roadblocks between fintechs and private banks

Vincent Caldeira, a former Bank of Singapore tech and strategic programme head, speaks toAsian Private Bankerabout five inefficient processes fintech companies must grapple with when working with private banks.

Caldeira joined Singapore-based fintech Bondlinc as co-founder and chief technology officer in January.

He is tasked with overseeing the development and deployment of the company’s bond trading and execution platform.

Caldeira says that while there are many initiatives on offer in Singapore to support the growth of the fintech community – including those put forward by MAS’ fintech and innovation group – he has been surprised by the number of roadblocks that fintech firms must contend with “to work efficiently with financial institutions to deliver solutions to customers, in particular in the private banking space”.

He outlines five hurdles that he has encountered:

1. Legacy systems

Caldeira says that the “process transformation” that a bank needs to undergo, when approached by a fintech firm that has an innovative idea, is an arduous task due to the ongoing discussions at private banks about replacing or uprooting their archaic internal systems.

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“Process transformation, in terms of how to go digital or implement digital solutions to improve or replace legacy processes, can still be a struggle, as internal departments within the bank tend to try to fit their existing workflow into the technology solution, rather than move to a simpler, standardised process,” he explained.

Indeed, legacy systems often make the process of integrating new, upgraded and more efficient systems time- consuming and costly, tech integration advisors have toldAsian Private Banker. It is little coincidence that a number of private banks – including Standard Chartered Private Bank, Julius Baer and UBS Wealth Management – are currently in the midst of hefty tech revamps.

2. Three to six month onboarding process

Once a fintech firm’s pitch has been approved by a private bank, Caldeira notes that the vendor procurement

and onboarding process, which includes an outsourcing review, “is very lengthy”.

For a typical vendor, it can take three to six months before a decision is made and all the necessary approvals are obtained, he says. “Also, the processes are typically not so friendly to smaller organisations that are working with the banks on a co-development model, as opposed to bigger organisations selling software licences,” he added.

Caldeira gives the example of a time when the deployment and testing of Bondlinc’s solution took close to six months, when it could have been completed in just four weeks.

3. Tweaking projects while working with extra IT teams

Working with private banks that are fortified with internal legacy systems also means having to work with additional IT teams during the integration process, Caldeira says. He explains that this makes tweaks and the testing process “difficult and lengthy”.

“Often, this type of system integration is not standardised or documented and we have to work with the internal technology teams to build that capability as a project dependency.”

4. CEO versus business and project heads

Further, there is often a disconnect between the drive to transform processes and go digital – which is often championed by the CEO and senior management of the private bank – versus feedback from internal business and project heads, Caldeira says.

“Initial discussions with internal teams when starting implementation often result in a long list of potential issues or implementation roadblocks, and the temptation not to change anything can be real,” he explained, adding that this can further delay projects.

5. The illusion of upfront capex costs

Financial institutions, including private banks, are accustomed to initial capital expenditure (capex) investments on tech projects, including costs related to infrastructure, testing production, upkeep fees, system tweaks and running an internal support team. However, Caldeira says that fintechs today work on a software-as-a-service (SaaS) subscription model, which is “straightforward” and does not include all the costs associated with upfront capex – except for custom integrations – as the price of the service is either determined by the volume of transactions or the user.

“There is always the temptation for banks to say they could build themselves internally, but not always a good awareness of how much this would really cost.”