BearingPoint's Abacus platform taken up by Raiffeisen Bank International

18 January 2018

Raiffeisen Bank International has confirmed it will leverage BearingPoint’s RegTech platform Abacus in the New Year. The consulting firm’s tried and tested offering will be used to help Raiffeisen meet its growing regulatory requirements, following the launch of MiFID II in January 2018.

Over the past two decades, regulation has expanded on multiple fronts – in particular accelerating following the international economic crisis of 2008 – and with landmark legislation such as the GDPR rapidly approaching, will continue to do so in 2018 and beyond. As well as the famous General Data Protection Regulation, financial constraints placed upon lenders and risk controls are also set to increase, so organisational compliance is now one of the top items on the agenda of most businesses, in order to avoid crippling fines. This is especially the case in financial services, where regulation is a key way of keeping the institutions running smoothly and minimising risks.

Against this backdrop, early on in the new Millennium, international management and technology consultancy BearingPoint began leveraging insights and expertise from management consulting to start providing its clients with solutions for dealing with regulatory requirements. The firm, which has its roots in KPMG Consulting and the now defunct Arthur Andersen Consulting, has been helping clients in the financial services sectors for decades with improving their reporting and compliance operations. The firm’s consultants saw huge potential to improve the technology landscape in the market.BearingPoint's Abacus platform taken up by Raiffeisen Bank InternationalNow, as BearingPoint prepare for a huge year for their RegTech offering, the firm has unveiled Raiffeisen Bank International has selected Abacus for its transaction-based reporting needs. Raiffeisen is one of Austria’s leading commercial and investment banks, and employs almost 50,000 people. The bank serves over 16 million customers through more than 2,000 business outlets – mostly in Central Europe. BearingPoint announced that Raiffeisen will use Abacus/Transactions to submit the daily reports, according to the requirements of the MiFID II and the accompanying MiFIR. The product is based on the proven Abacus platform, offering synergies by using one software solution consisting of several modules to support different types of transaction-based reporting. The layer structure gives the customer the flexibility to use the modules individually or in combination with other Abacus/Transactions modules.

MiFID II, which is touted as a major game changer for financial institutions, was originally scheduled for implementation from January 2017 – however delays saw its enforcement pushed to the start of this year. Now, the sequel to the Markets in Financial Instruments Directive, which updates a number of rules from the original to improve the transparency of the European financial market and strengthen the protection of investors, has finally come into effect.

Fariborz Nourani, Head of Division Head Office Operations at Raiffeisen Bank International, said, “As an important player in the financial market, we need to meet the whole range of transaction-based reporting requirements. With ABACUS/Transactions, we have found a software which can be used for various reporting types. This is time-saving, cost-effective, and will make our work much easier in the future, since we have to prepare and deliver the data only once.”

Robert Bosch, a Partner at BearingPoint, added, “We are proud that one of Austria's leading commercial and investment banks has opted for ABACUS/Transactions. Regulatory requirements for banks are constantly changing, and when coupled with the growing complexity of financial products, our software solution helps customers successfully master these challenges. With the RBI project, we continue to drive our international growth strategy.”

In 2017, BearingPoint launched a partnership programme for Abacus. The RegTech partnership, first announced in Germany, is likely to have an international rollout foreseen in due course. The suite of regulatory and risk technology solutions initially attracted five consulting firms – d-fine, Deloitte, ifb groupKPMG and PwC – who became the first companies on-boarded as partners.



The business and operating models of digital-only banks

04 April 2019

In recent years, several digital-only banks have successfully managed to nestle themselves in the banking landscape, with their popularity continuing to increase. Looking at it from the customer’s point-of-view, there is little difference between these FinTech unicorns; looking at the bigger picture, however, reveals significant variation in their business models. Matyas Fekete, a consultant at KAE, explores some of the main similarities and differences in digi-bank business and operating models. 

What about the profit?

Unlike in the UK, in most of continental Europe, bank accounts and corresponding banking services are historically paid-for services. The fact that digital banks offer most of their services free of charge has undoubtedly helped them build a large customer base. On the other hand, despite comparatively low set-up and minimised operational costs compared to that of traditional banks, and given the lack of revenue stemming from the typically no-fee model, profitability has proved difficult to achieve. Monzo, for instance, recorded a net loss of £30+ per customer in its most recent financial year. 

In the start-up world, it is customary to focus on expansion rather than profit – see the case of Uber, for instance. Still, while profitability might not be their number one priority in their early stages of development, it must be a long-term goal of any business. With their ever-growing customer base, digital banks are increasingly under pressure to turn their business from loss- to profit-making. 

Credit where credit is due

Digital banks pride themselves on their fair (often meaning “free”) proposition and have so far stayed clear of offering loans (including credit cards & overdrafts), traditionally amongst the most lucrative products for traditional providers. Though somewhat reluctantly, newcomers are also realising that offering lending products is one of the most straightforward ways to offset losses made on their free, often high-cost services (e.g. overseas ATM withdrawals). Monzo, N26 and Starling have recently started offering credit products to their customers, with their loan offering expected to be extended to a wide range of services, from mortgages to overdrafts. Correspondingly, creating a lending portfolio can also pave the way for launching an interest-paying savings offering – a proposition seen as a basic banking product that is yet to feature in most digital banks’ portfolios. 

The business and operating models of digital-only banks

The premium customer

While most digital banks offer most of their products for free, some have extended their offering by paid-for premium services in order to create a revenue stream. As these premium features – including different types of insurance, unlimited free transfers/withdrawals, faster payment settlement or concierge services – are often offered in a subscription format, customers are typically prompted to pay for the full package rather than just the desired service(s), providing a significant revenue stream for the bank. Revolut, for instance, was amongst the first digital banks in Europe to break even earlier this year, a feat largely due to revenue from its premium subscription.

SMEs like digital too

Traditional banks typically service small and medium sized businesses under their retail rather than corporate banking arm. Having their product offering tested with consumers, and consequently gaining a reasonable customer base, digital banks have also identified SMEs as an ideal segment to extend their target audience to. The five FinTechs profiled have already gone, or plan to go, down this path by following up their consumer solution with a business account. While both propositions are typically built on similar features, some providers charge businesses a monthly subscription (e.g. Revolut), while others apply additional fees to specific services (e.g. TransferWise), banking on the expectation that businesses are more likely to be willing to pay for banking – something they are already used to doing. 

The marketplace model

While most digital banks offer a wide range of banking services, some of these tend to come from partnering with third-party providers. For instance, Starling Bank’s only proprietary product is its current account, which serves as a basis for the provision of ancillary services, ranging from loans to insurance, to investment opportunities. Instead of developing these services in-house, Starling enables a select group of partnering financial service providers access to its platform in exchange for a fee. In effect, Starling is using its customer base to create a market for its partners, charging a commission for each acquired customer. 

In such cases of digital banks applying this marketplace model, the majority of their income often comes from partners rather than customers. Naturally, only banks with a large enough customer base can be successful in this set-up, underlining the current intensity of competition amongst digital banks.

Banking as a Service

While customer-centricity is heralded amongst the main USPs of digital banks, some are looking beyond offering consumer-facing services to diversify their revenue streams. Starling, which is among the few digital banks built on its own proprietary platform, has recently leapt into the Banking as a Service (BaaS) industry, making its technology available to other start-ups looking to launch a digital bank. Naturally, this raises the question whether the two offerings could threaten each other’s success. Generally, as long as such partners operate in different markets, the two business lines should be able to thrive alongside each other. Further along the line, however, such partners could easily end up expanding their banking solution into the same market(s) as they aim for global success, and by doing so, becoming direct competitors. 

Different approach, same result?

It is fair to say that consumers in Europe looking to bank with a digital-only provider would have a difficult time finding relative advantages/disadvantages amongst the leading players in the industry. Still, despite the limited surface-level variety, exploring the business models of leading digital banks reveals different approaches to the challenge of making money. Alongside the more straightforward method of offering paid-for premium features/subscriptions, some are banking on the value that access to their customer base offers to third-parties, while others outsource their technology to neobanks wanting to focus on the Fin rather than the Tech. With competition amongst digital banks heating up, it will be interesting to see which business model(s) prove to be the winning formula in the long term.