Building a digital bank: An interview with Andrew Moor

The following article is an adapted transcript based on the audio recording of Episode 4 Season 2 of the Mr. Open Banking podcast. The audio version is available here.

Dealing with the disruptive effects of digital technology is nothing new for banks. Today, banks face a whole new level of digital disruption.

The modern internet has radically reduced the cost of running a bank and the cost of reaching customers, effectively opening the door to a host of new tech-savvy competitors. At the same time, customers demand intuitive digital experiences from everyone they deal with, including their banks.

In response to these pressures, banks must bravely go through what they commonly call digital transformation.

Digital transformation is a journey

Digital transformation means a few different things. It means treating digital channels just as you would brick-and-mortar ones and meeting the customer wherever and whenever they need you. It means running a leaner, more agile technology shop that can make changes faster and easier. And it also means embracing innovation.

Make no mistake: digital transformation is a journey. The banks that cannot make this journey will suffer. Those that succeed in their journey will thrive and become part of the open future. But what exactly does it take to make that journey?

Andrew Moor & EQ Bank

In this conversation, we caught up with Andrew Moor: President and CEO of EQ Bank. Andrew is considered a banking maverick here in Canada, where he and the team at EQ have changed the precedent for what it means to offer financial services to Canadians, giving them access to faster, cheaper products that simply aren’t offered by the Big Five.

His keen eye for banking innovation has grown EQ Bank’s assets to over $35 billion and has established EQ as a leading digital banking provider. His focus is on understanding how banks can leverage technology to improve the societies in which they operate. It comes as no surprise then that he is a vocal advocate of open banking.

When EQ bank set out on its digital transformation journey, they were just looking for more deposits. But when they started interviewing European challengers, they discovered that technology enables them to do things quite differently.

It wasn’t long before Andrew and his team looked deeply into what traditional banks in Canada weren’t providing. Technology then allowed them to introduce innovative products — like the Savings Plus account – and operate much more efficiently than their peers.

Canada’s banking landscape is still a department store

Yet, for Andrew, this isn’t just about EQ. By his measure, the entire infrastructure of Canadian banking is out of date. Even doing basic things, like moving money, is expensive and takes a long time. For this reason, banks try to keep customers all to themselves.

However, the banking landscape is changing drastically. To illustrate this, Andrew uses the analogy of traditional retailing. Twenty years ago, you would go to a department store to find everything you needed in one place. But over time, customers realized that department stores didn’t offer high-quality specialty products. That’s when specialty retailers and online stores dominated the market.

Andrew says we are still in the department store phase. As banks innovate and open up their data and capabilities to specialized players, we are moving towards the specialty store phase, where niche providers use our financial information to cater to our unique needs.

Andrew believes that open banking will help Canadian banks work together towards modernizing this infrastructure. And this will help Canadians. It should start, he says, from the basic principle that you own your data. And for consumers to share the data they own; it needs to be easily accessible through institutions.

How open banking will benefit Canadians

What exactly does Andrew think open banking will do to the Canadian banking landscape?

“It’ll force us all to up our game, frankly.”

Banks must continue to leverage digital technology to improve their products, their systems, and the ways they respond to customer needs. This improves efficiency – raising profits for the banks while increasing the wealth of the societies in which they operate.

“I think one of our broader goals at a societal level is to make us all more prosperous and deal with issues of wealth inequality. Things like open banking absolutely lead in that direction.”

However, when it comes to the customer, banks should strive to be more in the background. The fact is, no one gets out of bed in the morning excited to do their banking. You’d rather, as Andrew says, set it and forget it. A digital bank knows how to be there when you need them and to disappear when you don’t.

Indeed, this notion of invisible banking or ambient banking has started to take hold in Asia and elsewhere. Andrew believes Canada is getting there, albeit slowly. Like many, Andrew would be encouraged to see more support from the top of the house, given the obvious benefits of moving to open banking.

“To me, this is one of those blinding glimpses of the obvious of something that we need to do to make Canada a better place to live.”

However, Andrew is encouraged by leaders, like Senator Colin Deacon, who is advocating for open banking positively and constructively. If you missed Mr. Open Banking’s conversation with Senator Deacon, you can listen to the full episode from Season 1 here.

Canada’s banking infrastructure needs to modernize

In addition to common APIs for the secure exchange of financial data, Andrew says Canada’s banking infrastructure needs to modernize in two more distinct ways.

First, faster payments. He stresses we must get the real-time payment rails up and running so that instant payments can be made. And second, digital identity. To ensure people can validate themselves online, Canada needs to have good systems for digital identity in place.

“Then we can really create a future-proof Canadian banking system that’s going to serve the needs of a growing and more sophisticated population.”

EQ Bank has used technology to achieve innovative firsts. Rather than creating a siloed banking structure, EQ Bank has a three-tier architecture in which the back end, the mid-tier, and the front end are decoupled.

Their cloud-based core banking system also runs over the top of Microsoft, which means it is scalable in real-time. Plus, Andrew says cloud-based models are allowing smaller institutions to acquire a level of security that even the largest banks couldn’t provide on their own.

Although it’s difficult to transition older systems into cloud-based systems, Andrew says open banking can help speed things along. And in the long run, the potential security risks could make way for greater security measures.

“You can actually close down other areas of cyber vulnerability in a true open banking environment.”

Adopting customer-first business models

For banks that are ready for open banking, Andrew says many business models can help them provide more useful services to customers. However, the most innovative disruptors will be able to move the dial and capture market share for the younger demographic.

“They will be a customer of yours for the next 50 years because you’ve explained to them how you are helping make their lives better through an open banking environment.”

Still, one of the greatest benefits of open banking applications is that they provide banks with the functionality to help people deal with finances at every stage of life.

EQ has adopted this customer-first mentality through API technologies. For example, their TransferWise integration allows customers to make international transfers quickly, conveniently, and at a lower rate. Andrew believes that, through these types of technologies, banks across the country can start doing better for Canadians.

“We need to do good things for our shareholders, but we also need to do good things for the societies we serve.”

How to prepare for open banking

So, how can banks prepare for open banking? Andrew says lean into it. Banks are full of smart people doing smart things. All it takes is for the CEO to ensure their employees understand open banking by putting their full weight behind it.

As for individuals, Andrew encourages Canadians to educate themselves about open banking and tell their legislators that they want more competition in the market. As consumers slowly realize that they own their data, the demand for open banking will increase. At this point, Andrew says it’s simply a matter of time.

Digital transformation is partly a technology journey

Andrew talked about the modernization of infrastructure and the move to the cloud. He even talked about how APIs ease integration with partners, who can extend your offerings.

Yet, building a digital bank is about much more than technology. Being truly successful on your digital transformation journey requires a shift in mindset.

Be creative in the products you design. Understand that customers come in all shapes and sizes. Learn to give up short-term revenue for long-term relationships.

If you want to succeed, do so by making banking better. Not just better products, but better customer experiences. Keep doing what’s right for shareholders, but also do what’s right for society.

And that’s what open banking is all about — helping banks be better banks.

As Andrew says: start with the basic principle that your customers own their data, and you are there to help them share it. Not just to let them share it, but to help them share it and use it to make their lives better.

To build the digital bank of the future, always put the customer first and recognize that ultimately you can’t be all things to them. If you care about them, help them leave the walled garden, and maybe, just maybe, they’ll let you travel with them, wherever they go. To learn more about EQ Bank, visit their website: .

Visit Mr. Open Banking @ http://mropenbanking.com.