The Payments Podcast, from Bottomline Technologies
The Power of FI and Fintech Partnerships to Better Serve Customers
Teresa: Hello. I'm Teresa from Payment Matters, and welcome to this podcast, where we're going to explore the power of FI and FinTech partnerships to better serve customers. I'm joined today by Chris Peck, Managing Director Banking EMEA for Bottomline Technologies, by Tim Tor as well, Head of Digital Technology, Commercial Bank, NatWest, and James Hodgson, also from NatWest. James is Head of Commercial Payments and FX, Commercial Bank.
Chris, Tim and James are going to share with us their insights and learnings, based on three main areas. Firstly, I’m going to say, “Why partner at all?” Is it a choice? Is it a necessary evil? Why do we partner? Secondly, working with another firm, rather than in-house, brings different considerations, so what are those considerations, and how can they be navigated successfully?
Thirdly, based on a real-life programme, our experts are going to share learnings, based on positive and less positive experiences. Let's talk about what's driving partnerships in the first place. Chris, Bottomline partners with lots of banks. What are the common challenges that banks are facing?
Chris Peck: Morning, Teresa. I think it's fair to say that there are definitely common challenges faced by all of the banks. To kick us off, I think it is helpful to understand why and how those have grown over the last few years.
The payments landscape has completely changed in the last 10 years. The innovation agenda and unprecedented pace of change for payments, both domestically and globally, is there for all of us to see – incredible growth in the last 10 years.
If you add into that the kind of regulatory framework that comes with that pace of change and new entrants, it gives an increasing number of challenges that the banks have to be able to keep up with, both in terms of compliance and innovation.
The first challenge I think that creates for banks is capacity. Really, what we mean by that is bandwidth. How do you keep the lights on and keep up with the innovation agenda that our customers and the bank's customers are now expecting us, as two partners, to be able to deliver against?
The second element is competition. The environment has become far more competitive. Many more areas, not just the peer groups that the banks compete with, but also FinTech, new banks, new challenger banks, digital banks, and the gaffers, so competition coming in from all different areas.
The last aspect I would add to that is the cost, in terms of the bank's cost to comply with the regulation but also be able to innovate at that same time, is incredibly difficult to manage. I think that it would be fair to say that the way in which banks can achieve that is to partner with organisations that can help them in that regard.
Teresa: Tim, Chris has described there a demanding landscape, but, notwithstanding those challenges, would banks prefer to develop solutions in-house?
Tim Tor: I think, historically, the answer would be yes, but, as Chris alluded to, the market has changed quite dramatically. Over the last few years, I think banks have moved away from that traditional kind of in-house first approach and are far more open and considerate to partnerships rather than just in-house. So, I think it has become the norm to make those choices between do you do it yourself, or do you look for someone else to support you?
Teresa: Okay. I guess that that brings me to, like, would you then go down a supplier route or a partner route? For Tim, for you there, what's the difference between the two?
Tim Tor: For me, a partner is really about finding someone who has the niche experience and specific skills that they can bring to the table to really develop a relationship, whereas, if you look at a pure supplier relationship, it could be just about filling particular FTE roles, yes, to close some resourcing gaps.
Those are two very different things, so the partnership, for me, is essential to really start working on longer-term, strategic projects rather than the short and tactical filling of roles. Those are two very different things, in my view.
Teresa: They are. Taking that a degree further, then, could you partner with any firm?
Tim Tor: I think the answer is no. There are obviously a number of questions that you need to look at when you're trying to assess who is a strategic fit as a partnership. First of all starts with experience and expertise of those niche skills that I just referred to. So, are you working with someone that actually adds value to your existing teams?
It's very important to look at it in that sense, because you can't do a partnership in isolation. You have to set yourself up to work together and to want to work together, so those people that you bring in externally need to be a value-add to the team, and they need to be part of the team. You have to really form it as one unit, so, no, you can't partner with everyone.
Yes, the way we go about it is really looking at our strategic agenda and, therefore, looking at that logical fit where you can start to build cohesive teams. That is a mixture of internal and external resources, but it's very important to find that mutual, yes, relationship.
It's not only about delivery. It's also about what's in it for both parties, so, i.e., is there a strategic benefit for both parties? It could be financial. It could be intellectually. It could be around delivery and market reputation, so it's really around how do you complement each other as you start to agree and embark on that partnership journey?
Teresa: That's great. Thank you, Tim. James, Tim mentioned their long-term strategy. How important is the alignment of strategic direction? I mean, isn’t it just a single project? When it's delivered, everybody shakes hands and moves on.
James Hodgson: I think that that strategic alignment is key. I think for me, certainly, it's what differentiates a partnership from just a supplier arrangement. We work for a relatively large bank. We know that we're attractive, particularly because of our customer base, with a number of potential FinTech suppliers.
There is a tendency to call every supplier arrangement a ‘partnership’, but I don't see it that way. I think sometimes we're just looking for someone to do a job, whether that's a delivery FTE job that Tim's talking about, or provide a specific bit of technology or software to plug a gap for us. For me, the partnership really comes in when you've got that longer-term, strategic roadmap that you can evolve over time between the two of you.
Clearly, it has to start with a project. It has got to start somewhere, and you've got to build and learn as you go. Success breeds the right to go again, so to speak, but the critical piece for me is that both sides can see a number of broader, strategic avenues that you can develop into.
Picking up on Tim's point around that kind of mutual interest, it's are we really clear on our roles, where our interest is, where we want to play, and where we're less interested or where we don't want to build ourselves? Actually, there's sufficient scope for both sides to grow in the relationship.
Teresa: Thank you. I think from what the three of you have said there, in answer to that earlier question, partnership is a choice. I think we've established that. I want to look now at the considerations of working with a partner rather than in-house development. Chris, in your experience, what are the key ingredients for successful partnerships?
Chris Peck: It's a great question, I wouldn't. I'd like to pick up on a couple of the points. Firstly, I think James and Tim have mentioned a couple of things that are super important there. The first is to be able to complement each other, that Tim mentioned. I think that's absolutely essential. Strategic alignment, James mentioned, and basically having avenues to explore together, James also mentioned.
I'd add a further three which I think are super important in successful partnerships. The first is recognising and playing to each other's strengths. What does that really mean? Not replicating or duplicating the areas that we're both good at, but actually combining them so that the sum of the parts is better for everybody and all round.
I think the second piece is trust and respect. So important in a successful partnership, having an open and honest relationship where we can share what's working well, what's not working well, so that ultimately, we achieve the ambition of the partnership and what we're trying to achieve.
I think the last one – and this is probably one of the harder ones but makes all the difference – is confidence. That means being able to tell each other what we know might not work, avoid mistakes, learn, and use the experience of what we've had in the past so that, if we know that something we've seen historically hasn't worked well, bringing that to the table to avoid both of us making a mistake in the programme is so important.
So, it's confidence to be open and share what we think can work or not work. I think those three are really key to how partnerships succeed.
Teresa: I think they are. I think also, I think we all agree that there's a role for transparency as well. Chris, sometimes it's felt that tech companies aren't wholly transparent when it comes to delivery schedules. Typical question I know, but what are your thoughts there?
Chris Peck: I think what happens, the reason that happens is, I think, that the organisation that is the supplier in that regard often wants to try and please. As a result of wanting to try and please, they set targets that are, frankly, overly ambitious when they know that they probably can't achieve those.
Actually, it's such a strange situation because, if people were honest and realistic about timelines and plans from the start, the outcome is always so much better. It's actually a false economy. When parties try to achieve dates that everybody understands and knows can't be achieved, it ends up costing more in time, in money, and ultimately erodes trust and, probably most importantly, disappoints the end customer, which is the reason we're both looking to delight that customer, not disappoint them.
So, being really realistic from the outset is so important, but it is understandable. You can see why people are just too ambitious. That’s what then creates that challenge, going forward.
Teresa: So, it's realism, which goes hand in hand with that piece about the transparency, the honesty as well we were talking about earlier, clearly. Tim, we've talked about transparency and honesty. Obviously, in all partnerships, some conversations can be trickier than others, so what's the best approach in those sorts of circumstances?
Tim Tor: Building on what Chris was saying, I think the relationship has to be built on trust and transparency. It’s very important, to pick up on one of Chris's other points, is to have that customer in mind, so who are you actually building your solution for? So, i.e., it could be an external customer or an internal stakeholder, but who's going to be consuming the end product? That's a key question to ask.
Then you have to make sure that you keep that customer or end user in mind when you start delivering outputs of that partnership. The key there is to really test, and learn, and to fail fast, to really get that feedback loop established, but also to be open and honest about feedback. So, if things aren't working well, don't beat up the supplier/partner in that circumstance. Really reflect on that to say, “Okay, how can we do better? How can we change our strategy on execution and delivery?”
You may want to even tweak the end product scope, because you're learning new insights. If you don't apply those insights, you're definitely going to compromise on the end quality of that experience. So, yes, it's absolutely vital to be open, to be honest, and to trust each other and to listen to each other, rather than to fall back into that traditional pattern of trying to please people, because that's really going to, yes, negatively impact the quality of the output.
Teresa: Yes, most certainly. Listen, and be receptive and open to challenge. I'm going to move us on now to bringing theories to life, and real-life examples and learnings from a programme that Bottomline and NatWest delivered in partnership. James, can you describe for us, please, the proposition that was delivered?
James Hodgson: NatWest were already number one in the BACS market by volume for the banks, but we had a couple of legacy channels. They were old, tired, dated, generally a bit unloved. As a result of that, most of our customers weren't using them, were using third parties.
For a bank that’s worried about customer primacy, wants to hold that relationship and deepen that relationship with that customer, that was an increasing challenge for us because BACS payments are still hugely important to corporate businesses.
We often think that they're diminishing. They’re really not, so having such a hugely important payment type, but actually the customer experience, and that channel experience around it not being where it was, was a challenge for us. So, we wanted to upgrade that capability. We wanted to migrate a number, or several thousand, customers over to that channel and really give them a best-in-class experience.
We recognised that our expertise, or our in-house expertise in this part of the market, was limited. Things had moved on since we'd put the original channels in place. A lot of the people had moved on. We probably didn't have the right insights and expertise that we'd really have liked to have had.
We also recognised that with the, shall we call it, ‘uncertainty’ caused by New Payments Architecture in the wider market, that building our own capability might not be the right outcome for the bank, as well. So, the partnership approach really came from those two drivers: how do we? Leaning back on some of the things that Chris has said around how do we think about cost and bandwidth, but also about how do we deliver the best possible customer experience for those customers?
We’ve run a multiyear programme with Bottomline to bring their leading BACS platform in-house, white-label it for our customers as a first step, and now we've completed the migration of all of our legacy customers over to it.
Yes, I'm sure we'll cover a little bit more of the detail, but it's clear that those customers are really enjoying a much better customer experience. The functionality that they've got access to now is streets ahead of what they had before. I'm very clear that we couldn't have delivered that experience if we'd gone down a build in-house route.
Teresa: That's brilliant. Thank you. You've painted a really, really bright picture there. Thank you. Tim, for context, what type and size of customer are we talking about here that's using this proposition?
Tim Tor: It's a good question. We started with a range of customers, but focusing first on the smaller customer base, so smaller-type businesses that utilise BACS. We worked our way through mid-corporate to large corporate, as part of the relationship that James just referred to.
The key thing to call out is really that, for all of those customers, they share very common user patterns in the sense that it’s payroll payments they do, so it's critical. Independent of what size business you're talking about, it's critical for them to make these payments and do it right.
Interestingly, we had different use cases. We had customers that were still using legacy channels, like fax or telephony, to initiate payments, but we also had digital channels where our customers were using legacy technology to submit BACS payments. All of those were in need for, yes, significant revamping and investment.
Interestingly, when you go down to an individual customer experience-level point of view, all of those clients were actually quite unhappy with the solutions that we historically provided. We initially thought that those that were using legacy technology like fax to issue payments would probably be the laggards and those that don't really want to move to a digital-first proposition.
But actually, in reality, when started calling those customers and engaging, we found out that their biggest frustration point was the fax technology. So, it's really about getting to know your end users, and testing, and learning with those clients as you move forward. In reality, they absolutely love the digital experience that we offer today.
Now, one of the challenges was to do this smoothly, and to manage that transition for those clients and not disrupt their day-to-day operations. That was really where the partnership kicked in. We had to work together with those clients to learn with them, and also help them through that journey to minimise any disruption, because, as you can imagine, any critical payment processes, like payroll, are absolutely essential for us, yes, to deliver without any notable customer disruption.
So, it was a very challenging project, but we did really well. It was always about maintaining quality, regardless of size and use case of those different client bases. Obviously, the larger customers you're dealing with, the more complex that setup becomes. You’re then dealing with, often, multiple users, multiple legal entities within that, so it's then about, “Okay, how do you roll that out?” But yes, it was a broad range of customers that we supported across the business banking and commercial banking space.
Teresa: Lovely. Tim, James, thank you for your candour there, because you've really described what customers migrated from, to, really, really well, the complexity involved, and the criticality of the payments. Chris, turning now to a Bottomline point of view, what was needed to support the proposition?
Chris Peck: There are a couple of aspects. The first is technical, which was actually the payments platform that we were migrating the customer base to. As James and Tim have already mentioned, it's a world-class payments platform that has, pleasingly, for all of us, provided a high-quality experience for the customers that have now migrated onto that platform.
Actually, that was the easier part, quite frankly, because it was a platform that already existed. We have many thousands of direct customers on that payments and collections platform. So, from a technical perspective, we needed to white-label that to make it… To give it the brand, and appearance, and feel consistent with the NatWest look and feel for the customers. That was actually relatively straightforward for us to do.
The more challenging aspect of the programme was how do we migrate the customers and do that in a way that gives them a good sense of what they're moving from and to? From that perspective, honestly, it's teams of people. It's teams of experienced people, both from the NatWest side and from our side, working extremely closely so that, in terms of the customer engagement, the customer on-boarding, the on-going support functions, gives the customer confidence in moving to a new payments platform, which is a big thing for any organisation, an important part of what they're doing.
So, the people aspect was definitely the most demanding. It needed experienced teams on both sides but ultimately was extremely successful and worked extremely well for the customers to move across.
Teresa: Great, thank you. Tim, I'm going to bestow upon you now the benefit of hindsight. So, looking back, what worked well?
Tim Tor: I think the key thing that worked well for us was that we truly embraced that partnership mentality. We obviously started by setting ourselves clear objectives. As I described in my previous point is it was absolutely of the essence that quality was our number one priority.
So, we went into it with that mind-set to say, “Okay, right, the customer experience needs to be spot-on. We're talking here about critical processes for our clients. We want to make sure we actually make the process better, not worse,” and, therefore, that disruption had to be minimised.
We also accepted that other variables, like time and cost, were things we had to keep an eye on, but they weren't leading. We absolutely agreed that quality was the number one priority and that we had to make some compromises, where needed, on time, so, i.e., the timescales that we set ourselves to complete the stage gate within the project or to complete the migration process. Those were guidelines. They weren't leading.
That’s also requiring us, as a business, to manage that message within our own organisation. Obviously, there are stakeholders to manage, to make sure that everybody is aware of that choice. There might also be customer communication that you have on the back of that, so how do you adopt and adapt your strategy as you gain new learnings?
But the key thing, next to setting the objective, or the shared objective, around quality, was also, yes, to test and learn, as I said previously. So, start small, focus on a pilot group of customers to get those learnings, to test the processes, to test the customer experience. Get the feedback. Tweak where needed, and change your approach where required, really to get it right first time for the majority of customers that follow the process.
We worked with our, yes, relationship teams to identify friendly customers that were keen to be part of that pilot process. That's very much a key step in any development of any project, is make sure you have an ability to have that feedback loop in a fairly safe environment. Then, once you've proven that, you can start to scale. That really works very well as a partnership.
Teresa: Perfect, thank you. James, every programme has success criteria and drivers, but for you, with this proposition, what were the critical drivers?
James Hodgson: If I go back to why we all wanted to come into this partnership in the first place, we had a legacy book of customers that we wanted to migrate and give a much better experience, so retaining that legacy book and making sure that we lost as few of them as possible on the journey, so to speak.
Also, we then had ambitions to grow the overall book. Those are the two, almost, headline numbers, but you also need to then think, “What does that actually mean?” and back to Tim's point around quality in customer focus. Customer focus: one of the number one things that we were measuring to do that, so it's important that we had a view of NPS from the start, right from the pilot, through the on-boarding journey, and then in live.
Then that also then links to a really high, or setting and agreeing upfront a really high, appetite to test and learn, to keep going. How do we refine that NPS? How do we continue to challenge ourselves around it?
Teresa: James, thanks for that. That's a really good understanding of the NPS score being a constant measure for monitoring but also for altering the programme and tweaking it as you went along. Chris, does what Tim and James have described as working well, does that chime with you?
Chris Peck: Yes. No, it absolutely does. I think the other element we need to remember is that part of the migration programme actually took place during the pandemic, which meant that it became even more important for both of us to listen, focus, and understand how and what that felt like for the customer.
So, we doubled down on making sure that we were understanding the customer experience. We had metrics that were measuring their delight but also what was important to them in terms of timescales, and not just from the customer perspective, which was super important. It also meant that our teams were working together remotely.
That went so well that at times it was difficult to actually tell who was NatWest and who was Bottomline, (Laughter) which is a testament, frankly, to the way in which the teams and the two organisations worked together at what was an extremely challenging time.
Tim Tor: If I just build on what Chris said about the pandemic, that was also a very interesting learning experience for everyone. Obviously, a tragic event in many respects, as well, but it also brought the best out of the team; creative thinking, as well, to help fix customer problems.
As every organisation, our clients also had to work from home. All of a sudden, you get practical issues around, okay, security tokens used for login and payment authorisation would normally be sent to corporate offices because that's obviously, from a fraud perspective, the safest delivery place, but that doesn't really work in a work-from-home situation anymore. So, collectively, we very quickly identified an opportunity to use a piece of software, so a soft token, to replace that process.
The great thing about that was that on our side it was working with our risk and security colleagues to quickly assess whether or not that was a viable option and within our security appetite. It was, and that was fantastic to see that response. A new solution was introduced within a matter of days to really delight customers, and that was very well received by our clients.
I think our high-performing partnership really starts to lean on each other and challenging each other with some of those, yes, unknowns that are being thrown at us. Yes, I was very impressed with how we managed to respond quickly to an ever-emerging and unfolding crisis, so really echo what Chris was saying that, yes, it was challenging.
There were obviously also some further compromises on timescales because no-one in a pandemic would push customers to the edge where they're trying to fight for their existence and their livelihood. We were very respectful of the fact that we had to extend timescales of completing this project.
We worked with clients. We identified which ones were ready to migrate. Those that needed more time because they faced challenges due to furlough schemes or other business priorities, we were, yes, trying to accommodate as much as possible over a longer period of time to work with those clients.
If you take a big step back, the original timescales were not held. That was fine because we said, from day one, “Quality is our focus.” Yes, we really stick to that philosophy, and it brought the best out of people during that crisis.
James Hodgson: It is a testament. That fluidity was there right from the start. It’s definitely what you want from a partnership. Sometimes you need to remember it's a dual-edged sword, though. I think there were times where the programme was running at such, almost, a fluid state that I remember being in a room, trying to make sure that we were documenting from a contract perspective. The programme was running almost so fast that it was causing us challenges to keep the documentation up to date, but I think that shows the true partnership in play.
Teresa: Tim, you've introduced there quite nicely for me, I was going to go to shade because, clearly, lots of good things happened on this programme, and customers are delighted at the end of it, but not everything goes to plan on a programme. Of course, it doesn't.
You've described for us there that customers were slower than envisaged to migrate, for reasons that are individual to those customer bases, but also, of course, with the pandemic. Chris, from a Bottomline point of view, what was needed to spur migration?
Chris Peck: It was people. Interestingly, together, we jointly created a set of digital assets, videos, tutorials, things that we believed would really help the customer to have a frictionless on-boarding experience, a high-quality experience.
We thought those would be widely used, and our expectation was that they would be widely used. In truth, they weren't. They weren't used to the degree that we'd expected at all. Actually, people wanted their hand held. They wanted to be walked through the new experience, so what was needed was people, experienced people.
Fortunately, we both had experienced teams in handling large migrations that could literally talk with and walk the customer through those changes and the on-boarding experience. So, less use of digital and greatly increased use of people, perhaps again, as we've already mentioned, driven by the pandemic and the challenges businesses were facing. So, yes, definitely more people involvement than we'd expected.
Teresa: Okay, so a slight increase in cost, then, but, from what you're saying, not wholly significant. As you say, it was quality, and Tim said earlier about the investment in a long-term relationship. I'm interested in that. James, we talked earlier about aligned strategies, longevity of relationship, the difference between a supplier and a partner relationship. With that in mind, what's next?
James Hodgson: It's important, as I said before, to remember that success on the first stage, or the first deliverable, is what really gives you the licence to go again. I suppose that's where we are now. We've got the first key deliverables over the line, and it’s now, really, that the partnership starts to get exciting. I think everybody recognised that those first things were the, almost, core enablers: essential, great delivery, but maybe not the exciting bit. Now it's great to see us getting onto that.
We've got a number of things now that we're starting to explore, both enhancements to the existing BACS programme, building out new customer experiences, expanding it so we can expand both the market and the customer base that we can apply it to, but also deepening that experience with those customers, but also taking the partnership into new areas.
An example of that would be we’re very close now to deploying a new Confirmation of Payee service for our agency bank population. Most of the listeners will know that Confirmation of Payee is now available via most of the major banks, but, if you're a small agency or challenger bank, there are gaps there in your service, which makes them potentially vulnerable to fraud. As a big, indirect asset supplier in the market, we need to close that gap, and it’s an area where we see the partnership with Bottomline really helping us
Teresa: That's interesting. I’m appreciating that you can't say too much, because it is early days and what have you, but with the Confirmation of Payee and agency banking initiative that you've referred to, what's in that for NatWest?
James Hodgson: It's back to my earlier point around deepening those relationships with the customer. Clearly, we are a significant bank. We take a major role in the UK payments market, and the resilience and security of that service is obviously critical to us. It's a hygiene factor. Making sure that we can extend that to our agency customers is key, so making sure that the reach of this very important industry initiative is available to them is a great benefit for us.
Teresa: And, I guess, just widening the industry reach and protecting the market.
James Hodgson: Yes.
Teresa: Yes, so a good play. Thank you. To close, a heartfelt thank you to Chris, Tim and James for your candour in sharing your experiences and giving really actionable learnings when it comes to partnership.
If you've enjoyed this podcast, which I hope you have, do have a look at the wider series, as well, which examines other payment topics on the Payment Podcast series, but, Chris, Tim and James, thank you.
Chris Peck: Thank you.
James Hodgson: Pleasure, thank you.
Tim Tor: You're welcome.