StanChart’s ‘banking as a service’ enables ecosystem players to offer financial services seamlessly

5 May 2020

Standard Chartered has unveiled its new banking as a service venture ‘nexus,’ which offers partnership opportunities and allows ecosystem players to enter financial services without having to set up a bank.

  • The banking as a service model opens opportunities for new entrants to provide financial services without having to build it from scratch
  • Standard Chartered’s first partner for nexus is a major e-commerce platform in Indonesia
  • This is the first venture by the bank’s innovation unit SC Ventures that runs innovation labs, fintech investment fund and experiments with new business models

New entrants such as payments, e-commerce, ride hailing and social media companies increasingly seek to expand their offerings in financial services but face several challenges. The banking as a service (BaaS) model empowers such players and integrates banking seamlessly through a white-labelled solution. This business model is what Standard Chartered uses in its recently launched venture called nexus, which brings transformational partnerships between consumer platforms and digital banking.

“Applying for licences, committing capital, building an end-to-end technology solution and bearing the operational costs of running a financial service can be heavy and extremely painful to set up. We offer the ability to move into that space by plugging into our stack, leveraging our balance sheet and liability without having to build it from scratch. This will be far quicker and more efficient to scale,” said Kelvin Tan, venture lead at nexus.

Tan explained that nexus enables ecosystem players to offer financial services, allowing them to design and support their own value proposition while relying on the bank’s balance sheet and licence.

Incubated at its innovation unit

nexus was incubated under the umbrella of SC Ventures, the unit that drives the bank’s innovations and fintech investments.

Sharing the details, SC Ventures head Alex Manson explained, “Firstly, we have innovation labs called eXellerator, which is in the bank, for the bank and by the bank. Here, we run the fintech programs, new proofs of concept and it also has SC Ventures Fintech Bridge, a matching engine between fintech and use cases.

Secondly, we have a $100 million fund set up to invest in relatively early stage companies. We invest only in partners we work with and we help them scale.

Thirdly, we build ventures wherein the idea is to experiment with different business models, aggregating different capabilities and ways of conducting banking. These are startup companies built from the ground up, and then bring in the investment partners to help them scale. nexus is a venture – in fact, our first venture.”

Among other new business models by the bank include a joint venture with Assembly Payments to develop and deliver next-generation payment solutions. In Hong Kong, it is set to launch a standalone digital retail bank, Mox, and the bank has also built a digital open platform, Solv, to help SMEs in India.

How nexus came about

The solution originated with the thought process of understanding how the bank could gain exponential scale and drive the newer order of banking, in which banking gets integrated into the day-to-day lives of consumers and businesses.

“We considered two options: doing this through application programming interface (API) or reinventing the entire technology stack and middleware and ensuring that change management is as seamless as front-end partners like e-commerce or social media players need it to be. This firmed our view of building up nexus as a business model for the bank in terms of gaining exponential scale and also as a technology solution to other banks. We focused on how one can grow banking and balance sheet exponentially without growing proportionate costs accordingly,” Tan expanded.

Manson explained that while building the framework, the bank looked at different possible scenarios.

The first scenario is where banks become the digitised or digital banks themselves, such as those digital banks in Hong Kong or neobanks in the United Kingdom. In the second scenario, banks become platforms with an ecosystem – they have open architecture and could plug in the capabilities but not exclusively, as other people plug in as well. In the third scenario, rather than becoming platforms, banks become an engine for the platform, i.e. they plug into the ecosystem platform.

“We felt this could be a good outcome for banks to leverage the scale of consumer platforms and ecosystems and provide banking services at scale. nexus is this scenario number three,” Manson elaborated.

The venture is set up as a separate legal entity. While it works within the risk appetite of the bank, it also has separate governance, policies and processes. It comprises about 100 people based in three key markets in Asia: Singapore, India and Indonesia.

Future roadmap

Standard Chartered has already acquired its first partner for nexus, a major e-commerce platform in Indonesia. Being a hotbed for e-commerce with one of highest adoption rates in the world, launching nexus in Indonesia will give Standard Chartered the opportunity to reach a significant unbanked population through partners. While the bank refused to share the name of the partner, it expects to co-create and launch products powered by nexus in 2021, subject to regulatory approvals.

The bank is starting nexus with the minimum viable product of retail and CASA products, with plans to add SME and corporate products later on. Future plans include rolling out the service to other promising markets in Asia, Africa and the Middle East.

It will bring a new revenue stream for Standard Chartered, but the bank plans to take a flexible strategic approach in forming partnerships depending on each partner’s needs.

“We are looking at a revenue share model, but we are flexible with regards to how we structure the deal. So, we are open to risk and asset sharing as well. The model will be customised for each partner depending on what they bring to the table. There is no one size that fits all,” explained Manson.

‘Banking as a service’ solutions in the industry

Standard Chartered is among the few early players that have entered in this space in Asia Pacific. In a slightly different approach, Ping An Group’s One Connect offers ‘technology as a service’ to other financial institutions in Asia. Some other players exploring the BaaS model in Europe include solarisBank, Starling Bank and Fidor Bank.

Among the early innovators is Fidor Bank, which provides white-labelled cloud solutions powered by open APIs. They cater mainly to challenger banks and consumer organisations that want to tap the market quickly without regulatory compliance hassles. This provides the organisations with a full set of banking products to be deployed.

In a similar model, German bank and technology company solarisBank offers a completely digital BaaS platform connecting other businesses through APIs to offer financial services.

UK-based mobile-only challenger bank Starling enables banks, fintechs and retailers to develop and scale new, customised products quickly by picking and choosing individual features or components from Starling while taking advantage of its banking licence.

In these end-to-end and shared infrastructure models, customer ownership remains with the ecosystem partners while the bank becomes the provider of banking capabilities at the back end. This provides a win-win relationship for both the partners. It drives new revenue streams for the bank as well as allows them to leverage their banking capabilities with the scale of ecosystem partners who tend to be inherently better and more agile at customer experience. On the other hand, it provides faster products, quicker time to market to ecosystem players and allows them to circumvent regulatory compliance challenges.

Through this venture, Standard Chartered can empower platforms to bring financial services at the fingertips of millions of users. Yet, it is still at an early stage, as the first partner will go live only next year. As the BaaS model gains popularity and matures, there is likely to be greater adoption as well as competition. For long-term success, nexus will need to carve a niche path for itself, stay ahead of the curve and expand its market reach with speed through new partnerships.

WFH Chronicles: SC Ventures’ Alex Manson

21 April 2020

Singapore’s «circuit breaker» – a curb of all non-essential businesses and activities, and heightened social distancing – has dramatically changed the daily routine for professionals in the financial services sector, many of whom are now working from home (WFH). This series takes a look at how they are coping during the city’s lockdown. Singapore’s fight against the Covid-19 pandemic stepped into high gear about two weeks ago, with a partial lockdown and mandatory wearing of masks in public, to curb the spread of the disease. Yet, infection numbers have continued to reach new highs, with 1,426 cases reported on Monday, making it the Southeast Asian country with the highest number of infections. Currently, workplaces have been forced to shut until May 4 in the earliest scenario, and nonessential businesses have had to either cease operations or do what they can to function virtually.

As work-from-home rules are implemented on a wide-scale, the implications of this period are going to be profound, with organizations forced into new ways of working, new tools, and different ways of interacting together, Alex Manson, global head, SC Ventures at Standard Chartered, tells finews.asia in an interview. The business unit within Standard Chartered enables innovation, invests in disruptive financial technology and explores alternative business models. Set up in 2018, it has been a key driver in promoting a culture of innovation within the bank, as well as developing and delivering digital solutions for both the bank and its clients. Alex Manson, Singapore has been at the forefront of Covid-19 prevention. Is the current lockdown a setback of its containment efforts so far?

I don’t see it this way, Singapore did a stellar job of managing the «early outbreak» but could not prevent re-importing the virus as the pandemic became global and other nations were slow to react and manage the situation, while people continued to travel freely with little awareness or precautions.

I find the answer in Singapore has been balanced through the crisis, meaning avoiding extreme pendulum swings and taking measures as a function of the information available at any point in time. This includes the fact that information evolves rapidly in a crisis, and I have in fact seen an element of refreshing humility in leadership with the ability to change your mind once you have new facts.

What are the biggest obstacles you are facing in your work these days?

Some aspects of our work continue almost undisrupted, working from home and using various digital tools, which we were advocating in the first place. Other aspects are really difficult: for example how do 12 people build a prototype around a table and a whiteboard? Well, there are tools for that too but yes it is just a lot more cumbersome.

Personally, I like to walk around, grab somebody for a chat – include another, improvise a quick meeting to solve a problem: that’s a lot harder too. And the most difficult part is to keep a good sense for how everybody is coping, how individuals feel in the current context – I can see anxiety building around the world, our teams are probably no exception and there will be an even more acute need to focus on people’s overall wellness in this environment.

How are you communicate with your clients now?

Remotely! That part is actually almost easy and I expect that in the future people may insist on a lot on face-to-face meetings as all are getting used to working at a distance.

Perhaps a helpful tip is the use of phone or video chat, etc., as opposed to e-mail: e-mail was never a great means of communication (it is good for passing on information, but certainly not for debating things or asking someone for a favor). I used to say when in doubt, pick up the phone. More so today actually.

How long can you ride out such a situation?

As it relates to ways of working, we’ll have to work this way for as long as it takes… I enjoy endurance sports and this situation reminds me of the reflexes of a long-distance effort: find a sustainable pace, don’t waste energy, think of «after» rather than «tomorrow» and importantly, just get used to the fact that it will be uncomfortable!

I am more worried about the long term impact of the crisis for a number of clients in our ecosystem: the longer this goes the more stretched they will be and we can see the first signs of distress with SMEs in particular – they typically represent 60 percent of any nation’s GDP.

Do you think Singapore as a financial center will lose its attractiveness over the Covid-19 crisis?

Quite the contrary actually. Singapore’s crisis management skills have been both effective and noted internationally, especially in comparison to some of the Western markets. I think Singapore may well gain rather than lose on a relative basis.

Alex Manson heads SC Ventures at Standard Chartered, a business unit established in March 2018 to lead innovation across the Group, invest in fintech companies, and promote the testing and implementation of new business models. Alex joined the firm as Group Head, Wholesale Banking Geographies in 2012, and was Global Head of Transaction Banking, between 2014 and 2018. He also spent 12 years at Deutsche Bank, notably as Global Head of Lending and Corporate Banking Coverage, and was at Credit Suisse for 8 years. 

SOLV supporting India’s SMEs and community during COVID-19

India’s lockdown to stem the spread of COVID-19 has affected many business owners, and disruption in the supply chain had caused a massive shortage. Kiranas (grocery shops), medium to large retailers have had to close their shops.

India’s government has since allowed stores supplying essentials to open. But retailers and grocers do not have the channels and connectivity to procure their supplies from those higher up in the value chain, namely, manufacturers, traders and wholesalers.

Our venture SOLV, a B2B conversational commerce platform, is helping businesses get back on track.

How has SOLV helped?

SOLV is helping all sellers and buyers who are already on their platform; deliver basic, daily essentials such as groceries, fresh produce and FMCG products.

  • For suppliers who are unable to continue doing business with their regular buyers, SOLV is helping them connect with new buyers.
  • For buyers who are struggling to get supplies from their existing suppliers, SOLV is helping them connect with new suppliers.

The lockdown is to enforce public health safety. So even if retailers are open, going out and getting supplies poses a serious health hazard. Our SOLV team is going the extra mile by helping retailers supply large residential communities, non-profit organizations and hospitals. They are actively engaged in assisting small businesses to operate, in turn, supporting people in getting access to much-needed supplies.

So far, the team has helped thousands of SMEs on the platform and they continue to add more businesses onto the platform every day. The crisis has accelerated SOLV’s business model in terms of relevance, impact and reach out to new segments and opportunities. SOLV believes there is potential in servicing them even in the long run.

Know of India-based SMEs in need?

Email – cs@solvezy.com / call & whatsapp +91 91081 91081

2 years of Rewiring the DNA in banking

It’s now been 2 years since we started SC Ventures

Then, we highlighted three priorities: creating strategic options in banking through venture building, committing to intrapreneurship focused on client and business problem statements, and experimenting with the way we work. On the second anniversary of starting our mission of Rewiring the DNA in banking, we are taking stock and considering what’s next. 

Innovation across the ecosystem

Innovation draws on collaboration across individuals & businesses, fintechs, industry peers and the wider ecosystem.

  • We opened new eXellerator labs in Nairobi, Shanghai and Hong Kong
  • 500 internal and external partners visited whilst we opened in Shanghai; likewise another 500 in Hong Kong, which included our inaugural RegTech flywheel industry collaboration
  • 1,500 people visited us during 16 hours of Singapore Fintech Festival – as much as the space would allow
  • Singapore and Africa collaborated on the first Afro-Asia Fintech Festival with the Central Bank of Kenya and MAS
  • SC Ventures Fintech Bridge went live in both English and Chinese as a meeting place for fintechs and the Bank, bringing solutions and business challenges together. Over 500 fintechs are now registered and we launched another 5 challenges or use case searches since the beginning of this year. 

The spirit of Intrapreneurship lives on

31 intrapreneur teams are taking their ideas forward, including:

  • mortgage approvals in minutes in Dubai
  • digital savings whilst spending in Hong Kong
  • AI-driven client insights for Corporate, Commercial & Institutional Banking

We’ve heard 2,000 ideas since launch – from the Venus challenge marking International Women’s Day, challenges in China and Africa, to working with the FinLab teams in Taiwan. From these ideas, new services or capabilities of the Bank have emerged as well as individual ventures in their own right. The SC Innovate community now stands at 22,000.

Investing in potential

Our $100m investment fund was launched in early 2019. Fund investments are emerging technology partnerships for the Bank, on their way to scaling up. Among the companies we’ve invested in is:

  • Instabase with whom we’ve worked for several years and are now used in multiple production instances across the Bank. We were delighted to support their growth (and, along the way, a billion-dollar valuation)
  • We welcomed three other companies to the fund this year – Digital Reasoning, Silent Eight, and SOCASH

As we explore new technologies, we’ve been building a base of expertise and intellectual capital in digital assets and cryptocurrencies, which we believe is world-class in financial services – stay tuned for more news. Elsewhere in the Bank, investments were made in:

Building ventures for the future

Venture building is starting to bear some real options in the way we serve customers and communities. As we explore new business models, from building platforms to plugging into them and leveraging new technologies – such models are related to (but ultimately not constrained) by how we see banking today. We recently announced:

  • our platform joint venture with Assembly Payments to support e-commerce merchants aggregate and manage their payments
  • Solv, a platform for conversational commerce providing financing and other business services is in its testing phase, enabling growth for 5,000 SMEs in India
  • CardsPal is finding 1,200 people better lifestyle deals with their credit cards across Singapore
  • nexus has reached a milestone in bringing Banking as a Service (BaaS) at scale in our markets, beginning with a major partnership in Indonesia
  • as Singapore considers virtual banking, the Hong Kong Virtual Bank – branded Mox – will soon commence its second wave of beta testing

Thank you

Progress has been at times hard won but ultimately, deeply gratifying. Many individuals and teams have played a significant part in making the past two years a reality. For that, thank you. We had lessons learned too. Communicating our purpose for the Bank and its clients; helping the Bank be more experimental, moving more quickly with a healthy dose of calculated risk-taking; to name a few.

SC Ventures: Connecting

We live from engagement. Literally.  Just like humans need to connect with others in order to lead a purposeful life, we need connections in order to achieve our objective. For us, this speaks to the societal purpose of finance: when we “Rewire the DNA in banking”, we must do so in the context of the communities we serve, in order to make any sense at all. As SC Ventures, our community includes clients, Fintechs, corporate partners – then also people such as Intrapreneurs, subject-matter-experts and not least… you. 

Our commitment to you is to create the right conditions to experiment and shape new ideas into reality – from Intrapreneurship, client co-creation to fintech PoCs and venture building. Once again, thank you to everyone who has been part of the humongous effort to date.

Our aspirations far exceed where we are now. We are committed to making innovation an integral part of the culture in our bank and realizing the formidable transformation potential that exists today in banking.

To connect with us: visit SC Ventures Fintech Bridge or reach out to the team at our SC Ventures Linkedin page.

Come join us in Rewiring the DNA in banking.

Standard Chartered launches “Banking as a Service”

12 March 2020, Singapore/Jakarta – Today, Standard Chartered launched its “Banking as a Service” solution, nexus. Through nexus, digital platforms and ecosystems like e-commerce, social media or ride hailing companies, will be able to offer  loans, credit cards and savings accounts co-created with the bank to their customers under their own brand name. 

Standard Chartered is starting off with a major e-commerce platform in Indonesia as their first partner and expect to co-create and launch products powered by nexus in 2021, subject to regulatory approvals. Indonesia has the highest e-commerce adoption rate in the world  (88%) and piloting nexus here gives Standard Chartered the opportunity to reach the unbanked and expand its customer base in the world’s 4th most populous country. The bank intends to further roll out the service to markets in Asia, Africa and the Middle East with the right regulatory frameworks and established digital platforms. 

The USD29 trillion e-commerce market and the fast growing platform businesses space are constantly looking for innovative solutions that offer customers more choice and greater convenience. nexus will help these businesses benefit from Standard Chartered’s strong balance sheet and world class banking technology to deepen customer loyalty and grow revenues.  

Bill Winters, Group Chief Executive of Standard Chartered said: “nexus is potentially transformational for the bank and our customers. We will actively partner with leading consumer platforms in our markets to enable convenient access to financial services to millions of new, tech-savvy customers. We are starting with Indonesia, as part of our strategy to grow digitally and expand our business in this important, fast growing market.”

The “Banking as a Service” solution was incubated at SC Ventures, Standard Chartered’s innovation, fintech investment and ventures arm. It started from a business plan mooted by an employee, who now leads the venture with a team of over 100 developers, engineers, and business development professionals across three markets.

Standard Chartered has been actively experimenting with new business models to meet the evolving needs of its clients. The bank recently announced a joint venture with Assembly Payments to develop and deliver next generation payment solutions. In Hong Kong, it is set to launch a standalone digital retail bank in Hong Kong, Mox, in partnership with PCCW, HKT and Trip.com, and has also built a digital open platform, Solv, to help Small and Medium Enterprises (SMEs) in India and other markets grow by providing access to financial and business services.

Delivering next generation payments with Assembly

Singapore, Melbourne – Standard Chartered and leading payments solution provider, Assembly Payments, have set up a new joint venture to deliver next generation payment solutions for the USD 29 trillion global e-commerce industry[1].

The new company will be headquartered in Singapore with the intent to grow the business globally, and will offer a sophisticated digital payment platform to manage transactions across multiple payment types and countries, including online, mobile and point-of-sale, digital wallets, debit and credit cards and real-time payments.

E-commerce is growing exponentially in emerging markets, as internet adoption increases among the growing middle-class population[2]. The new venture will roll out its payment services to global merchants, supporting their ambitions to scale and solving key challenges they face in managing risk, fraud, integration, reporting and reconciliation.

Commenting on Standard Chartered’s payments strategy, Michael Gorriz, Group Chief Information Officer of Standard Chartered, said: “Payments is a critical pillar of banking services. Enabling Real-time Faster Payments and high volume transactions has been a core area of investment for Standard Chartered in line with the evolving needs of clients, particularly with the growth of e-commerce platforms and wallet apps. Our venture with Assembly Payments complements these capabilities, giving our corporate clients a complete offering for high throughput inward and outward payments.”

Alex Manson, Head of SC Ventures, the innovation, fintech investment and ventures arm of Standard Chartered, said: “As the world moves towards platform-based e-commerce, the need for the next generation of tools to empower merchants and enable financial inclusion continues to grow. We identified payments as an area where we wanted to make a strategic investment. Assembly Payments shares our vision and we are pleased to partner them based on the strength of their core technology and talented team.”

Simon Lee, Co-CEO Assembly Payments, said: “This deal creates a once in a lifetime opportunity for Assembly. We have created a significant business in Australia and now, together with Standard Chartered, we are well placed to crack the international payments market and exponentially grow the business. We are also proud that this is one of the first major global fintech deals between a global bank and a major Australian fintech company.”

Assembly Payments is one of Australia’s fastest-growing fintech businesses. Named in Australia’s top ten startups for work by LinkedIn two years in a row, the startup has gone from strength to strength in pioneering payment innovation in Australia. Assembly has been working to capitalise on the demand for new payment solutions — brought on by the introduction of the country’s fast payment network, the New Payments Platform — in Australia and abroad.

Standard Chartered has actively been experimenting with new business models to meet the evolving needs of banking clients. In Hong Kong, it has established a strategic joint venture with PCCW, HKT and Ctrip Finance to deliver a new standalone digital retail bank in Hong Kong and has set up virtual banking partnerships in Taiwan and Korea. It has also set up a digital open platform, Solv, to help Small and Medium Enterprises (SMEs) in India and other markets grow by providing a range of financial and business services.

[1] United Nations Conference on Trade and Development: Global e-Commerce sales surged to $29 trillion, 29 March 2019
[2] Knowledge@Wharton: Why Emerging Markets Are the Next E-commerce Frontier, 1 November 2017

For further information please contact:

Harrison Polites
The Media Accelerator (Assembly)
+61 409 623 618

Josephine Wong
Standard Chartered
+65 6596 4690

About Assembly Payments

Assembly Payments is a leading Australian payment innovator providing digital businesses with a comprehensive set of payment solutions to facilitate complex end-to-end payment workflows.

Since founding in Melbourne, Australia in 2013 Assembly has grown to employ over 130 staff, raised over $70 million AUD and has been named as one of LinkedIn’s top startups for work two years in a row.

Hong Kong banks race for digital dominance

Eight new virtual groups are set to join the territory’s crowded market 

10 December 2019

Hong Kong is not a city obviously in need of more banks. Almost all Hongkongers have at least one banking product and HSBC alone has 100 branches in the territory.

Yet eight new entrants are set to join this crowded market in the next few months. They will be “virtual banks”, with no branches and a digital-first approach to doing business. 

They hope to emulate the success enjoyed by newcomers such as Monzo and Starling in Europe, by tapping into customers’ dissatisfaction with traditional banks.

Deniz Güven, chief executive of an as-yet unnamed virtual bank being launched by a consortium including Standard Chartered, said that Hong Kong is a “very mature market” for banking products, but he added: “when you look at the service level, Hong Kong is still immature.”

With the banking sector so densely populated, virtual banks always faced a challenge. Over the last few months though, the obstacles have multiplied.

When licences were granted between March and May this year, recipients could not have foreseen the chaos which Hong Kong has experienced in the months that followed. Clashes between police and protesters over the past six months have led to death, destruction and a deep recession.

Rolling out a massive marketing campaign in a city preoccupied by protests would be jarring. Launching a bold new bank with no fanfare is also an unattractive option. One corporate lawyer who knows the virtual banks describes them as “cagey” when it comes to confirming a launch date. Any movement in the next quarter, she said, was unlikely. 

The window of opportunity for virtual banks was opened by a lack of innovation and poor customer service among the established players. Across business sectors in Hong Kong, banking “ranked last for customer excellence” in a KPMG consumer survey of 1,999 consumers published last week. 

The expectations of consumers are “constantly evolving” in response to “new digital initiatives and capabilities,” said Isabel Zisselsberger, head of financial management, customer and operations for KPMG in Hong Kong. “The industry needs to catch up quickly,” she added.

Standard Chartered’s virtual bank will focus squarely on experience, said Mr Güven. “My KPI is not getting ‘this’ many customers,” he added.  But the longer virtual banks wait to launch, the more time incumbents have to counter with their own digital initiatives. Citigroup, which was the first bank to roll out internet banking in Hong Kong in 1998, didn’t apply for a licence earlier this year.

That “doesn’t mean [Citi] don’t want to be a virtual bank,” said Angel Ng, Citi’s chief executive in Hong Kong and Macau. “At one point, sooner than people expect, we will become a virtual bank. Today, 50 per cent of our accounts are acquired online…we are pretty much halfway there.” 

HSBC, which alongside its local sister bank Hang Seng, boasts a 40 per cent share of the retail banking market, has been busy bulking out its in-house digital team. It is also creating a spin-off company which will service loans to small and medium-sized businesses — a key target for the new banks.

According to Mr Güven, Standard Chartered opted for a separate entity so it could start from the bottom up. “What we are doing here is creating a future operating model…We are not just building a mobile app, it’s not a facelift.”

Getting into the market fast was important, he said, “but it may not be the best thing. Coming to market with the right value proposition is the most important thing.”

Article: https://www.ft.com/content/3f498e64-1aa6-11ea-97df-cc63de1d73f4