Portfolio for change

Mario Aransay, who oversees Santander Innoventures’ portfolio, discusses fintech partnerships, AI-based predictive banking and the future of his industry

The Santander Group is on a mission. The Spanish banking giant is investing heavily to climb the digital banking tree, shaking out the best fintechs and specialists to work with as it moves on up.

Santander’s Innoventures portfolio was set up with $100million back in 2014 as a venture fund for promising startups. The idea was to identify useful technologies for the Santander Group and partner with them to help drive better customer service and experience. It has certainly been successful in spotting the high fliers, with Ripple, Curve and Kabbage among those backed to date.

Mario Aransay is the man who oversees the portfolio, which focusses on five key verticals that have been prioritised due to the value they can bring to customers: payments, marketplace lending, e-investment advisory, client and risk analytics, and digital delivery of financial services.

His team typically invests between $100,000 and $10million, but are happy to go higher if they believe it’s an exceptional opportunity. They carefully look for early-stage companies with a product or service that is mature enough for them to take to customers. The end game is to help these companies scale and grow by giving them access to distribution, expertise and brand.

“When you bring in a partner, they have to be synergetic,” he says. “They have to be synergetic with the current stack that the bank may have built. They have to build on what already exists. Not only that, they have to anticipate what is coming. And, on top of that, they have to be capable of interacting with other partners. Together, we can bring really exciting solutions to our customers.”

AI leads the charge

One specialism that’s emerging strongly from the portfolio is artificial intelligence (AI). In 2017, Innoventures invested in cognitive banking provider Personetics, which is an AI-powered personalised banking platform, and Gridspace, a leading platform for conversational intelligence that allows companies to analyse and operationalise speech and text inputs.

“Personetics’ objective is to drive customer engagement in digital channels,” explains Aransay. “It does it through personalised insights. Leveraging artificial intelligence, it sources the transactional data of the customer and, with that, provides them with personalised insights. When you are thinking about being customer centric and empowering the client, the first thing you have to give them is knowledgeable and relevant insight about what is going on in their transactions.”

These deals were part of a flurry of investment in AI that year. Another notable strategic investment was in the UK-based fintech Pixoneye, which offers predictive personalisation technology.

It’s fair to say that predictive banking – using technology to help customers make the right decisions based on the data it holds on them – is a major part of Santander’s future plans, and the direction that it sees the industry moving in. The key is choosing the right technology partners to deliver these services. One of the defining elements
for Santander in making that choice is that it can trust a partner will deliver competitive solutions for the bank, even though it might be working with other banks at the same time.

According to Aransay: “We found in Personetics a company that fulfilled not only by being a top-notch solution, but having the right soft partnership principles, which enable us to create value for the customer and for both organisations. We have found we can create a trust environment for collaborating on strategic projects for our bank, while it is engaging with other banks. We fully expect that partners will not only engage with Santander, but also with others, and I think that’s a healthy thing. The stronger the partner is, the better for the bank.”

Personetics is working with around 30 banks, including Singapore’s UOB (United Overseas Bank). It’s a company in demand and, to meet it, Personetics has opened a new research and development centre in Nazareth to accommodate a team that has more than doubled in the last two years.

A comprehensive approach

Santander is meanwhile busy restructuring internally to deliver its digital transformation plan. The bank recently hired a new chief platform officer, Aiaz Kazi, from Google to help it become an open platform.

Open banking, introduced across Europe, thanks to the revised Payment Services Directive (PSD2), is a veritable gold mine for fintech, which has the opportunity to capture more of the banks’ traditional territory and revolutionise the banking experience for customers. The banks, in turn, have just passed the much-anticipated deadline to have the application programming interface (API) technology in place to comply with customer-sanctioned data sharing under PSD2. It’s been a tough regulatory hurdle, but they can now exploit it by teaming up with the right partners.

“For years, banks have benefitted from consumer trust. But that’s not good enough anymore. Banks should also be responding to the complexity and time scarcity that people live with, and making it simple for customers to manage their finances. That is going to be enabled by technology. Technology is agnostic. You can use it for good or for bad. If banks want to keep the level of trust we have accumulated, then we have to use the technology under the right principles.

“The banks have awakened and PSD2 has enlarged the ecosystem,” says Aransay. “The conjunction of the two is better services for customers.”

Going beyond the core

AI-enabled robo-advice, for example, is a fast-growing trend across a number of product areas, including pensions, mortgages and insurance. It will now increase even more dramatically, thanks to the increased pool of data on which to base recommendations. Personetics is one of the leaders in this space, using cognitive banking to provide financial advice. The right partner, the right time.

All of these impressive developments sit against a wider background of Banco Santander putting aside €20billion for digital investment over the next four years.

As part of that, the global bank announced that it is investing $700million with IBM to build ‘the most advanced IT architecture of the financial sector. A five-year global technology agreement, in addition to providing considerable annual savings for the bank on IT spend, will enable Santander Group to evolve towards what it hopes will be an open, flexible and modern IT environment. Interestingly, it also taps into Watson, IBM’s renowned suite of enterprise-ready AI services, applications and tooling.

In addition, Santander has now set up a Cloud Competence Centre, and is set to benefit from building digital platforms just once for the entire group of banks, removing potential duplication and other frictions. Santander UK’s chief data officer, David Hayes, was quoted last year as saying: “I firmly believe technology will completely change banking in the next 20 years. The challenge for the industry will be to embrace those technologies – and the winners will be those that can do that in a way which is right for the customer.”

No one can accuse Santander of not putting in the groundwork.

 

This article was published in The Fintech Finance Magazine: Issue #13, Page 24 & 25

Author: Yash Hirani

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