Embark on a financial odyssey with Sachin Sharma from audax, uncovering the game-changing realm of Banking as a Service (BaaS). Grasping the keys to this kingdom isn't just for the tech-savvy; it's for anyone who's ever made a digital purchase or pondered the future of banking. From audax's inception in the competitive incubator of Standard Chartered Ventures, Sachin breaks down how BaaS is weaving into the fabric of our daily online activities. Imagine leveraging branded credit card perks without leaving your favorite game—yes, it's that integrated. Sachin's storytelling demystifies the complexity and draws a clear line from the revolution of mobile banking to the bright horizon where banking meets us exactly where we are.
This episode is more than a peek behind the curtain; it's a strategic masterclass in the evolution of banking product capability. We traverse the landscape of emerging technology with examples such as the synergy between e-wallets and banking services, harmonizing with established process like KYC without causing a system overhaul. The conversation sheds light on the importance of cloud-agnostic approaches in a sector where tradition meets innovation at a crossroads. And as we wrap up with a heartfelt nod to the Money Pot community, we're not just saying goodbye—we're stoking the fires of curiosity and inviting you to add your voice to the chorus calling for financial enlightenment. So, if you're ready to understand where the future of your money is heading, this is an episode you can't afford to miss.
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Sheryl Chen (00:03):
This is Ascential Audio.
Rachel Morrissey (00:13):
Welcome to The Money Pot.
My name is Rachel Morrissey, Iam the co-host and the head of
content for the US show, and Iam here with my co-host, Sheryl
Chen, who is the Head of Contentfor the Asia show.
How are you doing, Sheryl?
Sheryl Chen (00:29):
I am doing okay.
It is very overwhelming andalso very surreal seeing
everything that you've beenworking on for the past 11
months come to life.
Yeah, it's an amazing feeling.
Rachel Morrissey (00:45):
I was gonna say how are you feeling about
the show now that it's open?
Are you like, are you feelinggood?
Because it looks amazing itlooks amazing.
Sheryl Chen (00:54):
I am feeling good, but also being cautiously
optimistic.
You know, with live events,things might always happen.
Rachel Morrissey (01:01):
You are always cautiously a little bit of a
knock on wood going on there.
Well, today we are speakingwith Sachin Sharma of audax.
Sachin Sharma (01:09):
That's right.
Rachel Morrissey (01:09):
You know I was reading up on your philosophies
as you guys were starting Audixand I just wanted to kind of
get a little bit of backgroundon you for our listeners, give
them an introduction to you.
So could you kind of provide alittle bit of an overview of
what you guys, what inspired youto start Audix?
Sachin Sharma (01:32):
All right.
First of all, thank you forhaving me.
Oh, we're so glad it's a veryexciting venue here at Money
2020 Asia For the listeners.
We are sitting in a glass boxin the middle of a bustling
conference.
It's very exciting.
A bit about me and audax.
I started Audax with a coupleof co-founders way back in 2018.
(01:56):
Way back, Ancient history bynow.
We were incubated with StandardChartered Ventures oh nice.
And our first use case wasimplementing end-to-end banking
as a service platform forStandard Chartered Bank itself.
So that's a bit about me andAudax.
(02:17):
The origin use case wasessentially a situation that
retail banks are facing almosteverywhere across the world,
which is how do we acquire andmaintain retail customers
profitably?
So that was our origin problemstatement and essentially we
(02:40):
said that you got to have adifferent business model if you
want to scale profitably indigital, in retail.
And for us it was very clearthat the new business model will
have something to do with thewhole lot of digital activity
(03:00):
that was happening throughe-commerce, through social media
, through ride-hailing companies, and essentially our answer to
acquiring customers profitablywas to collaborate with these
companies and essentially bringthe bank to where the customers
are, rather than asking the bankto come to the traditional
(03:20):
channels of RMs or branches orsales teams sending you forms at
the train stations, right.
So that's the business model wechanged.
Now, in brief, banking did nothave a platform to connect the
old bank technology to these newdigital players right, and
that's what we've built over thelast four years now this.
Rachel Morrissey (03:42):
This is interesting because basically,
when we went to solve thisproblem, this has been a problem
of a lot of differentgeographies and a lot of
different places.
Banking as a service has beengoing through some growing pains
in certain geographies and inother areas is flourishing.
What are you seeing in themarkets that you're in that is
(04:04):
kind of making you feel likeit's actually a really good time
to be in this particular space?
Sachin Sharma (04:11):
Yeah.
So I think, for your viewers,also to your audience, rather to
give an idea of where we are onthe timeline of banking as a
service.
Now imagine you are in early1990s and someone comes around
and says hey, you know what,we're going to have this mobile
phone.
It's going to be a smartphoneand you're going to log into
that and do all your banking.
(04:31):
And people are just going tolook at you and say you know,
you're smoking something, right.
Rachel Morrissey (04:36):
Or that you belong on Star Trek.
But yes, exactly exactly right.
Sachin Sharma (04:40):
So we are somewhere in that timeline for
banking as a service.
It is from our perspective andfrom all the study that we have
done and all that we seehappening around us, this is
going to be the largest, fastestgrowing channel for banks to
acquire and service customersfrom, so you cannot ignore this
anymore.
Now, of course, just likemobile banking or internet
(05:03):
banking or SMS banking beforethat, it's something new.
So people need to have theirprocesses in place, their
governance in place, theirunderstanding of the regulations
in place, to be able to beimplementing banking as a
service effectively.
And actually that's where acompany like Audax comes in,
because we have gone throughthis entire cycle with a major
(05:27):
international bank and weunderstand all of these pieces
and how to put them together formore banks now that Audax is
serving.
Sheryl Chen (05:44):
You know, I really like the homage that you paid to
1990s, because I was going toask you like.
Everyone is talking aboutbanking as a service, right, but
how would you explain bankingas a service to, let's say, my
five-year-old niece, olivia, whois going to be like this is
going to be part and parcel ofher life when she maybe not even
when she grows up, but soon.
Sachin Sharma (05:59):
Yeah, that's a great question and I have some
practice with that because Ihave an eight year old.
He was probably four when westarted, so we have been so I
think.
Imagine Olivia is playing avideo game on your mobile Right,
which her mother doesn't wanther to, but since you're the
(06:21):
aunt, you're spoiling her andshe's, she's, she's playing a
video game right.
And then, essentially, she seesa pop-up which says hey, you
know what.
You can get all of theseadditional superpowers in this
video game if you buy thesecredits.
And her mom thinks that youknow what she's spending so much
(06:46):
on this, on these payments thatwe are doing on video games.
If apple play store had asolution where I could just get
a better deal out of all thestuff that olivia is buying
through the apple play store,all the stuff that Olivia is
buying through the Apple PlayStore, and lo and behold, you
see an Apple card which isgiving you 5% off on all your
(07:15):
iTunes purchases.
That is a really great use caseof banking as a service, where
Apple is not the card issuer.
There's a bank behind it.
Apple doesn't have a bankinglicense.
There's a bank behind it.
Apple doesn't have a bankinglicense.
There's a bank behind it andthere's a technology layer which
connects Apple to the bank andgives this fantastic experience
to Olivia and her mom.
Of course, olivia needs to makesure that mom is aligned before
(07:40):
she makes those purchases.
Sheryl Chen (07:41):
But it's a great deal.
Sachin Sharma (07:43):
You don't need to go hunting for an iTunes card
or something that gives you avalue proposition to iTunes.
Apple created it for you andthat's how you need to
understand banking as a service.
It's a fully serviced financialproduct backed by a regulated
entity, but exposed at anon-financial front end.
(08:05):
And imagine this can beextended infinitely to different
customer segments, differenttypes of digital platforms, so
it's really powerful.
Rachel Morrissey (08:17):
I mean, in a nutshell, that is exactly where
you see everything going.
I mean, it's not thatsurprising that you would see
tech companies like Apple orsome of these others get into
the payment side of it and bethe front man, because they have
the hardware, they have thecustomer trust also, and so it's
(08:38):
kind of an interesting marriage, so to speak.
One of the things that wascurious to me when I was reading
about you was that yourphilosophy is that the banking
as a service is actuallyinviting collaboration, not just
competition, and thecollaboration is going to be key
(09:00):
to how all of this works.
Now you can obviously say how apartnership between Apple and
its bank would be acollaboration, but what is it
about the nature ofcollaboration that you think is
going to make a big differencein the way that this system
works?
Sachin Sharma (09:17):
It's going to make all the difference.
And again, for your audience,there will be people on the side
of the digital platforms whichare really trying to innovate
into financial services andthere will be people from the
mainstream banks which see themas direct competition.
Now my request to them is tokind of open your eyes and see
(09:38):
the possibilities that arecoming out of working together
and collaborating, and I willlay it down as a use case.
So let's say you are a bige-commerce player in a market
like Thailand.
You want to make it easier foryour customers to make purchase
decisions on your platform.
(09:58):
Now, how does that happen?
One, you need to understandyour customer.
You need to understand theirneeds better, and you may not
have all the data to understandtheir needs.
Second, you need to be able togive them more options of being
able to check out creditfacilities, low transaction fees
, all of those things.
(10:18):
On the other side, you're a bankwhich is trying to increase
their spends on e-commerceplatforms, because now they're
seeing that 20-30% of thepurchases are happening on
e-commerce they're not happeningon retail stores.
So one thing is that you cankeep on doing independent offers
and trying to attract the sameset of customers and pull them
(10:40):
in two different directions.
The second way to do this, andprobably the right way, is to
collaborate pretty heavily, andcollaborate not just from a
point of view of referringcustomers to each other, but
creating a value proposition anda data stream which flows both
ways.
The bank shares data with thee-commerce company to target
(11:02):
their customers better.
You create a joint valueproposition which gives much
better benefits for using thisparticular credit card or credit
line or payments facility onthe e-commerce platform, and the
bank also gets data from thee-commerce player to do KYC, to
(11:22):
do risk assessment, tounderstand the transactional
behavior of their customersbetter.
So it's really a win-win-winsituation.
And I think at the beginning ofthe show you talked about the
brands that have now come up ondigital right.
People trust these brands andbankers need to understand that
an e-commerce company has now avery strong relationship with
(11:45):
the customers that are, you know, are using both services.
So it's all about collaboration.
Rachel Morrissey (11:52):
You know it's always interesting because I
have for years I've always heardthis banking.
You know a relationship withyour bank and I was like I don't
believe I've ever felt like Ihad a relationship with my bank.
I feel like I've had an accountwith my bank right.
(12:13):
And sometimes multiple accountswith my bank, whether I think I
should have multiple accounts ornot.
And I think about this idea oftrust that you're talking about,
and the fact is is that thereare companies or brands that I
have built up trust with andthat I trust a lot more, whether
(12:36):
it's my bank or not.
So how do you see thiscollaboration, kind of enhancing
trust or deepening therelationships that you have with
your bank, because I, you know,I still am I'm still a little
bit suspicious of using thatword for your bank account.
Sachin Sharma (12:59):
You spot on because let's go back in time 50
years back, where meeting yourrelationship manager or walking
into your you know, friendlyneighborhood bank branch was the
only way that you could dobanking.
Things have changed.
You don't want to go to a bankbranch anymore till you really
need to.
You don't wake up in themorning on a Saturday morning
(13:22):
and say, hey, let's go dobanking tonight.
No one does that.
Sheryl Chen (13:26):
So you spot on with that.
Sachin Sharma (13:31):
The important thing is that you do want a
trusted counterparty to holdyour funds, and it may not be an
e-commerce company, but youalso trust the e-commerce
company for bringing in greatvalue, engaging you in a
meaningful way, and you havethis trust which has grown over
(13:56):
time with a lot of these digitalbrands.
Now banking as a serviceactually combines the two things
.
So, if you see the propositionthat we've been launching, it is
you have an Amazon accountpowered by Standard Chartered,
so your front end is the brandthat you really like to interact
with on a daily basis.
(14:17):
You spot on.
You don't want to interact withyour bank on a daily basis,
doing things that you like to do, which is buying things,
gifting things, booking yourtravel, making your travel plans
.
Those are the things thatpeople like to do, but, at the
same time, with the trust that aregulated entity is in the back
end and all the controls are inplace to keep your transactions
(14:40):
and your funds safe, and thatis again you can say it's a
trust multiplier model.
You can say it's a trustmultiplier model, right, and
that's what we see where thefuture is really in terms of
your basic transactional needs,your savings and your loans.
Sheryl Chen (15:00):
So we were talking about collaboration just now,
right, and I want to ask you, asa CPO, who maybe will have to
advise other CPOs, right,because I think something that
people often struggle with ishow much am I building something
for myself?
Because you guys do white labelsolutions, right?
So where do you draw the linebetween white labeled solutions
(15:23):
and I'm actually ending up?
It seems like I'm building afeature for them, like, how do
you draw the line?
Sachin Sharma (15:30):
Yeah, again, a great question.
So the fact is that there is noone standard implementation
which has been understood verywell with all the different
parties involved.
The way we have solutioned ourproduct capability is that
(15:50):
compatibility is a key productprinciple that we followed,
which is, essentially, weimplement our solution in the
context of the existingtechnology of the bank and of
the partner that they want tocollaborate with.
Let me give you a pretty simpleexample.
One of the implementations thatwe have done is a bank
(16:14):
partnering with an e-walletcompany.
The e-wallet company has alicense to issue an e-wallet,
which means that they have donekey components of the KYC for
this customer.
So the bank doesn't need thatpart of our solution.
What it does is to create auser journey which is
integrating with the solutionthat this e-commerce partner
(16:35):
already has.
And that is something againthat, because we have this
holistic view of the complexityof banking and the service and
the fact that people are stilldiscovering how to do it right,
we've built a product in a waywhich is essentially compatible
and it gets deployed in thecontext of that use case.
But yeah, it's something whichis evolving and you cannot have
(16:57):
a one-size-fit-all approach,especially in this market where
people are still kind ofdiscovering different components
.
Rachel Morrissey (17:06):
So when you are looking at being a white
label and you're feeling likethat gives you a lot of
flexibility in the solutionsthat you're able to offer, what
do you think that your originfrom starting to charge banking
as a service proposition?
How does that influence theimportance of embracing those
(17:29):
emergent technologies Like, whatwas it about that experience
that allowed for that?
Sachin Sharma (17:40):
It's a very, very important point, because when
you are essentially looking toenable a completely new business
model, you have to have a freshview on everything, including a
very important component, whichis your technology.
So we really did not benchmarkourselves with other banks.
(18:02):
We benchmark ourselves withFacebook or Meta or with Apple,
with the technologies that thesecompanies use, and our stack
essentially uses a lot of keycomponents which are either
created by some of these bigdigital brands or are used by
(18:25):
these digital banks.
For instance, we use a databasecapability called Cassandra.
It's not very popular withbanks.
Banks are still using PostgresSQL.
Cassandra was created by Meta,by Facebook, and now it's an
open source technology which wehave utilized in our stack, and
(18:47):
it's really fit for purpose.
It's able to process millionsof transactions at a much faster
turnaround time, which is whatis required for this scaled
business model, and banks werenot using those technology.
So I think that's one of thethings you've got to keep your
mind open.
You've got to benchmarkcorrectly.
You cannot be benchmarking toold tech.
You need to be benchmarking towhat the future is going to be.
(19:09):
Another choice that we've madeis that we are cloud agnostic
and cloud compatible, becausethat is something which is again
inevitable In terms ofinfrastructure.
Cloud is going to be theinfrastructure of choice going
forward and therefore we workwith partners like AWS, like GCP
(19:30):
, to deploy the capability, andthat makes a world of difference
in terms of being able to go tomarket faster, maintain your
infrastructure and capabilityand also scale when you need to
scale.
Otherwise, you're strugglingwith procuring multi-million
dollar servers which might notbe getting used at all.
(19:51):
So I think that is the approachKeep your mind open, benchmark
correctly.
Rachel Morrissey (19:57):
What's interesting to me about what you
just said was you didn't takeyour inspiration at all from the
bank.
Not really.
Sachin Sharma (20:04):
Not, really, not at all.
Rachel Morrissey (20:07):
And you were really looking to the other side
.
So when you were looking to theside like Meta or Facebook,
whatever you want to call it,I'm still like Twitter and
Facebook.
I'm so old now it's not Twitteranymore.
Sheryl Chen (20:22):
I know.
Sachin Sharma (20:22):
It's not Twitter.
Rachel Morrissey (20:23):
It's not Facebook.
It's not.
Sachin Sharma (20:25):
It's very difficult to say I X'd you.
It doesn't sound right, itdoesn not Facebook, it's not.
It's very difficult to say X, IX'd you.
It doesn't sound right.
Rachel Morrissey (20:29):
It doesn't sound right.
I mean I'm like, oh, I don'tget it Anyway.
But so when you were lookingfor that, you were looking
forward to these kinds of thingsand you were really looking to
be more on the tech side ofthings, which makes sense.
But what do you say to some ofthese banks that you work with
about being forward like thatand how do you work with their
(20:53):
technology?
What was it about yourexperience at Standard Chartered
Banking that sort of gave youthe chance to be this middleman.
Sachin Sharma (21:03):
Yeah, so what you have to appreciate is banking
is a heavily regulated industry.
Yeah, so what you have toappreciate is banking is a
heavily regulated industry.
Yeah, what that means is thatthere is this certain natural
resistance for introducing toomuch change at one time.
There is also for good reason.
For very good reason I've beena banker for 20 years.
(21:25):
I understand the complexitythat bankers have to deal with.
Very good reason I've been abanker for 20 years.
I understand the complexitythat bankers have to deal with.
Um, for good reason, over time,components in the technology
stack have been added.
So you, if I'm a cio, I'mlooking at a stack which has
been built, let's say, over thelast 30, 40 years.
Nobody really completelyunderstands that.
And now, if you ask me that youknow change a big portion of it
(21:45):
.
It's a big thing, right, it'sa's a big, it's expensive, it's
complex, it can impact yourcustomer experience.
So our strategic approach isnot to upfront go and tell banks
that, hey, you know, your stackshould be replaced wholesale.
What we implement is new usecases where you're going after a
(22:08):
new customer segment or you'reimplementing a new business
model.
So I want to launch a digitalbank which is happening all
around us in this part of theworld.
Or I want to introduce abanking as a service platform
and go after partnerships as abusiness model.
That's where we implement anend-to-end stack which coexists
with your existing technologyand, over time, it gives you
(22:31):
confidence to say hey, you know,everything is working really
well on this side of the newstuff that we've done.
Now can we start migratingcustomers and products onto this
new stack and getting rid ofthe cost on some of our old
capability?
That has been our strategicapproach, which has been quite
well accepted and, honestly,even if I was still on the bank
(22:53):
side, even I would be reluctantto implement some of these major
projects while running the ship.
I don't want to change theengine while running the ship.
I might as well build aspeedboat right next to it and
see how fast it goes.
Sheryl Chen (23:06):
So you just now you talked about how your platform
allows for open data.
Right, I wanted to just pivot alittle bit and ask so because
Rachel is here.
You're seeing the trend of openbanking really take off in the
US and in Europe.
Rachel Morrissey (23:21):
Right.
Sheryl Chen (23:23):
So how are you seeing that trend happen in Asia
?
How is it playing out here?
Sachin Sharma (23:30):
Directionally open banking is something that
is going to happen in all themarkets.
The question is is there goingto be a clear regulatory
framework in each of thesemarkets or is it going to be
market-driven, where theindustry players are deciding
what the structure is going tolook like?
Where the industry players aredeciding what the structure is
(23:51):
going to look like, the goodnews is that you have PSG2 and
GDPR as reference points ofregulation and we've built a
stack with that regulation inmind.
Wherever there is a regulatorwhich actually introduces an
open banking platform, likeIndonesia has done two years
back, their regulation is calledSNAP.
(24:11):
It's essentially aconsent-based API data sharing
framework.
It is also referencing the bestpractices of GDPR and PSD2.
So, again, from our platformpriorities perspective, we have
the right benchmarks.
So, again from our platformpriorities perspective, we have
the right benchmarks and webelieve we can easily roll this
out for markets where there is aregulation which is already
(24:34):
published and where there is noregulation published, we can
consult with the industry andwith the banks and the
regulators to show them the wayof doing this right.
Rachel Morrissey (24:54):
And this is going to be interesting because
in Europe, like you said, theyhave the GDPR, they've got these
regulations that are all set,and then the other side of it,
in the US, it has, until thispoint and until this year,
basically been very marketdriven and there's been a huge
amount of adoption throughmarket-driven.
But it isn't universal andthere's lots of reasons for that
.
What markets in Asia are you,when you look at what markets in
(25:15):
Asia, do you think wouldbenefit more from a more
regulator-forward approach, andwhich markets would benefit more
from a market-driven approach?
Sachin Sharma (25:27):
benefit more from like a market-driven approach.
The honest answer that we thinkis everywhere the regulator
defines the path forward.
It's easier Because there canbe two outcomes of a
market-driven approach.
One example is China, where yousee, and financial and WeChat
(25:51):
essentially run away withinnovation and lo and behold,
15% of the population is nowusing WeChat and Ant Financial,
and I'm talking eight years back, 15% of the population was
using it.
When you come to that point oftime, the regulator has very
little option but to kind offollow and align to that market,
because the growth has been sofast, the adoption has been so
(26:12):
fast.
But more often than not, whensome of these technologies scale
, that's when the regulatorsteps in and starts asking tough
questions, which is what ishappening in Europe right now.
So you know there are a lot ofbanking as a service.
So open banking is a littledifferent from banking as a
service.
Yeah, open banking is focusedon consent based sharing of
(26:34):
customer information and consentbased debits in the customer's
accounts.
Open banking is about creatinga financial product.
Oh sorry, banking as a serviceis about creating a financial
product in a non-financialentity.
So they are two slightlydifferent things.
And on banking as a service.
We do see EU regulators nowstepping in and asking tough
(26:59):
questions to companies whichhave been operating in this
space and have been innovatingthat.
Who has the responsibilityaround the customer's data,
around the KYC, around thereporting?
Now, our approach again was toalways meet the highest possible
regulatory standard from dayone and also to engage the
(27:20):
regulators up front, because weknow, at least in this part of
the world, the moment you startscaling, the regulators are
going to step in and ask youthose tough questions.
And when they ask those toughquestions, we already have the
right answers and the rightbenchmarks and the right
principles of implementation andthe right controls around data
(27:41):
and transactions to satisfytheir requirements.
So I think it's always betterto have a regulatory-led
approach, but I'm a regulator.
I have 100 things to deal with.
I deal with it when it scales.
Rachel Morrissey (27:58):
Which makes sense.
That is going to have to be itfor today.
We have to wrap up.
Thank you so much for joiningus.
We've had a lovely discussionand I just want to say to all of
our listeners thank you fortuning into the Money Pot.
If you want to be part of MoneyPot at the show, email us at
podcast at money2020.com andgive us your best ideas and
(28:22):
please give us a review whereveryou listen to us.
We want you to know weappreciate you.
We love our FinTech nerds.
This is Ascential Audio.
Rachel Morrissey (00:13):
Welcome to The Money Pot.
My name is Rachel Morrissey, Iam the co-host and the head of
content for the US show, and Iam here with my co-host, Sheryl
Chen, who is the Head of Contentfor the Asia show.
How are you doing, Sheryl?
Sheryl Chen (00:29):
I am doing okay.
It is very overwhelming andalso very surreal seeing
everything that you've beenworking on for the past 11
months come to life.
Yeah, it's an amazing feeling.
Rachel Morrissey (00:45):
I was gonna say how are you feeling about
the show now that it's open?
Are you like, are you feelinggood?
Because it looks amazing itlooks amazing.
Sheryl Chen (00:54):
I am feeling good, but also being cautiously
optimistic.
You know, with live events,things might always happen.
Rachel Morrissey (01:01):
You are always cautiously a little bit of a
knock on wood going on there.
Well, today we are speakingwith Sachin Sharma of audax.
Sachin Sharma (01:09):
That's right.
Rachel Morrissey (01:09):
You know I was reading up on your philosophies
as you guys were starting Audixand I just wanted to kind of
get a little bit of backgroundon you for our listeners, give
them an introduction to you.
So could you kind of provide alittle bit of an overview of
what you guys, what inspired youto start Audix?
Sachin Sharma (01:32):
All right.
First of all, thank you forhaving me.
Oh, we're so glad it's a veryexciting venue here at Money
2020 Asia For the listeners.
We are sitting in a glass boxin the middle of a bustling
conference.
It's very exciting.
A bit about me and audax.
I started Audax with a coupleof co-founders way back in 2018.
(01:56):
Way back, Ancient history bynow.
We were incubated with StandardChartered Ventures oh nice.
And our first use case wasimplementing end-to-end banking
as a service platform forStandard Chartered Bank itself.
So that's a bit about me andAudax.
(02:17):
The origin use case wasessentially a situation that
retail banks are facing almosteverywhere across the world,
which is how do we acquire andmaintain retail customers
profitably?
So that was our origin problemstatement and essentially we
(02:40):
said that you got to have adifferent business model if you
want to scale profitably indigital, in retail.
And for us it was very clearthat the new business model will
have something to do with thewhole lot of digital activity
(03:00):
that was happening throughe-commerce, through social media
, through ride-hailing companies, and essentially our answer to
acquiring customers profitablywas to collaborate with these
companies and essentially bringthe bank to where the customers
are, rather than asking the bankto come to the traditional
(03:20):
channels of RMs or branches orsales teams sending you forms at
the train stations, right.
So that's the business model wechanged.
Now, in brief, banking did nothave a platform to connect the
old bank technology to these newdigital players right, and
that's what we've built over thelast four years now this.
Rachel Morrissey (03:42):
This is interesting because basically,
when we went to solve thisproblem, this has been a problem
of a lot of differentgeographies and a lot of
different places.
Banking as a service has beengoing through some growing pains
in certain geographies and inother areas is flourishing.
What are you seeing in themarkets that you're in that is
(04:04):
kind of making you feel likeit's actually a really good time
to be in this particular space?
Sachin Sharma (04:11):
Yeah.
So I think, for your viewers,also to your audience, rather to
give an idea of where we are onthe timeline of banking as a
service.
Now imagine you are in early1990s and someone comes around
and says hey, you know what,we're going to have this mobile
phone.
It's going to be a smartphoneand you're going to log into
that and do all your banking.
(04:31):
And people are just going tolook at you and say you know,
you're smoking something, right.
Rachel Morrissey (04:36):
Or that you belong on Star Trek.
But yes, exactly exactly right.
Sachin Sharma (04:40):
So we are somewhere in that timeline for
banking as a service.
It is from our perspective andfrom all the study that we have
done and all that we seehappening around us, this is
going to be the largest, fastestgrowing channel for banks to
acquire and service customersfrom, so you cannot ignore this
anymore.
Now, of course, just likemobile banking or internet
(05:03):
banking or SMS banking beforethat, it's something new.
So people need to have theirprocesses in place, their
governance in place, theirunderstanding of the regulations
in place, to be able to beimplementing banking as a
service effectively.
And actually that's where acompany like Audax comes in,
because we have gone throughthis entire cycle with a major
(05:27):
international bank and weunderstand all of these pieces
and how to put them together formore banks now that Audax is
serving.
Sheryl Chen (05:44):
You know, I really like the homage that you paid to
1990s, because I was going toask you like.
Everyone is talking aboutbanking as a service, right, but
how would you explain bankingas a service to, let's say, my
five-year-old niece, olivia, whois going to be like this is
going to be part and parcel ofher life when she maybe not even
when she grows up, but soon.
Sachin Sharma (05:59):
Yeah, that's a great question and I have some
practice with that because Ihave an eight year old.
He was probably four when westarted, so we have been so I
think.
Imagine Olivia is playing avideo game on your mobile Right,
which her mother doesn't wanther to, but since you're the
(06:21):
aunt, you're spoiling her andshe's, she's, she's playing a
video game right.
And then, essentially, she seesa pop-up which says hey, you
know what.
You can get all of theseadditional superpowers in this
video game if you buy thesecredits.
And her mom thinks that youknow what she's spending so much
(06:46):
on this, on these payments thatwe are doing on video games.
If apple play store had asolution where I could just get
a better deal out of all thestuff that olivia is buying
through the apple play store,all the stuff that Olivia is
buying through the Apple PlayStore, and lo and behold, you
see an Apple card which isgiving you 5% off on all your
(07:15):
iTunes purchases.
That is a really great use caseof banking as a service, where
Apple is not the card issuer.
There's a bank behind it.
Apple doesn't have a bankinglicense.
There's a bank behind it.
Apple doesn't have a bankinglicense.
There's a bank behind it andthere's a technology layer which
connects Apple to the bank andgives this fantastic experience
to Olivia and her mom.
Of course, olivia needs to makesure that mom is aligned before
(07:40):
she makes those purchases.
Sheryl Chen (07:41):
But it's a great deal.
Sachin Sharma (07:43):
You don't need to go hunting for an iTunes card
or something that gives you avalue proposition to iTunes.
Apple created it for you andthat's how you need to
understand banking as a service.
It's a fully serviced financialproduct backed by a regulated
entity, but exposed at anon-financial front end.
(08:05):
And imagine this can beextended infinitely to different
customer segments, differenttypes of digital platforms, so
it's really powerful.
Rachel Morrissey (08:17):
I mean, in a nutshell, that is exactly where
you see everything going.
I mean, it's not thatsurprising that you would see
tech companies like Apple orsome of these others get into
the payment side of it and bethe front man, because they have
the hardware, they have thecustomer trust also, and so it's
(08:38):
kind of an interesting marriage, so to speak.
One of the things that wascurious to me when I was reading
about you was that yourphilosophy is that the banking
as a service is actuallyinviting collaboration, not just
competition, and thecollaboration is going to be key
(09:00):
to how all of this works.
Now you can obviously say how apartnership between Apple and
its bank would be acollaboration, but what is it
about the nature ofcollaboration that you think is
going to make a big differencein the way that this system
works?
Sachin Sharma (09:17):
It's going to make all the difference.
And again, for your audience,there will be people on the side
of the digital platforms whichare really trying to innovate
into financial services andthere will be people from the
mainstream banks which see themas direct competition.
Now my request to them is tokind of open your eyes and see
(09:38):
the possibilities that arecoming out of working together
and collaborating, and I willlay it down as a use case.
So let's say you are a bige-commerce player in a market
like Thailand.
You want to make it easier foryour customers to make purchase
decisions on your platform.
(09:58):
Now, how does that happen?
One, you need to understandyour customer.
You need to understand theirneeds better, and you may not
have all the data to understandtheir needs.
Second, you need to be able togive them more options of being
able to check out creditfacilities, low transaction fees
, all of those things.
(10:18):
On the other side, you're a bankwhich is trying to increase
their spends on e-commerceplatforms, because now they're
seeing that 20-30% of thepurchases are happening on
e-commerce they're not happeningon retail stores.
So one thing is that you cankeep on doing independent offers
and trying to attract the sameset of customers and pull them
(10:40):
in two different directions.
The second way to do this, andprobably the right way, is to
collaborate pretty heavily, andcollaborate not just from a
point of view of referringcustomers to each other, but
creating a value proposition anda data stream which flows both
ways.
The bank shares data with thee-commerce company to target
(11:02):
their customers better.
You create a joint valueproposition which gives much
better benefits for using thisparticular credit card or credit
line or payments facility onthe e-commerce platform, and the
bank also gets data from thee-commerce player to do KYC, to
(11:22):
do risk assessment, tounderstand the transactional
behavior of their customersbetter.
So it's really a win-win-winsituation.
And I think at the beginning ofthe show you talked about the
brands that have now come up ondigital right.
People trust these brands andbankers need to understand that
an e-commerce company has now avery strong relationship with
(11:45):
the customers that are, you know, are using both services.
So it's all about collaboration.
Rachel Morrissey (11:52):
You know it's always interesting because I
have for years I've always heardthis banking.
You know a relationship withyour bank and I was like I don't
believe I've ever felt like Ihad a relationship with my bank.
I feel like I've had an accountwith my bank right.
(12:13):
And sometimes multiple accountswith my bank, whether I think I
should have multiple accounts ornot.
And I think about this idea oftrust that you're talking about,
and the fact is is that thereare companies or brands that I
have built up trust with andthat I trust a lot more, whether
(12:36):
it's my bank or not.
So how do you see thiscollaboration, kind of enhancing
trust or deepening therelationships that you have with
your bank, because I, you know,I still am I'm still a little
bit suspicious of using thatword for your bank account.
Sachin Sharma (12:59):
You spot on because let's go back in time 50
years back, where meeting yourrelationship manager or walking
into your you know, friendlyneighborhood bank branch was the
only way that you could dobanking.
Things have changed.
You don't want to go to a bankbranch anymore till you really
need to.
You don't wake up in themorning on a Saturday morning
(13:22):
and say, hey, let's go dobanking tonight.
No one does that.
Sheryl Chen (13:26):
So you spot on with that.
Sachin Sharma (13:31):
The important thing is that you do want a
trusted counterparty to holdyour funds, and it may not be an
e-commerce company, but youalso trust the e-commerce
company for bringing in greatvalue, engaging you in a
meaningful way, and you havethis trust which has grown over
(13:56):
time with a lot of these digitalbrands.
Now banking as a serviceactually combines the two things
.
So, if you see the propositionthat we've been launching, it is
you have an Amazon accountpowered by Standard Chartered,
so your front end is the brandthat you really like to interact
with on a daily basis.
(14:17):
You spot on.
You don't want to interact withyour bank on a daily basis,
doing things that you like to do, which is buying things,
gifting things, booking yourtravel, making your travel plans
.
Those are the things thatpeople like to do, but, at the
same time, with the trust that aregulated entity is in the back
end and all the controls are inplace to keep your transactions
(14:40):
and your funds safe, and thatis again you can say it's a
trust multiplier model.
You can say it's a trustmultiplier model, right, and
that's what we see where thefuture is really in terms of
your basic transactional needs,your savings and your loans.
Sheryl Chen (15:00):
So we were talking about collaboration just now,
right, and I want to ask you, asa CPO, who maybe will have to
advise other CPOs, right,because I think something that
people often struggle with ishow much am I building something
for myself?
Because you guys do white labelsolutions, right?
So where do you draw the linebetween white labeled solutions
(15:23):
and I'm actually ending up?
It seems like I'm building afeature for them, like, how do
you draw the line?
Sachin Sharma (15:30):
Yeah, again, a great question.
So the fact is that there is noone standard implementation
which has been understood verywell with all the different
parties involved.
The way we have solutioned ourproduct capability is that
(15:50):
compatibility is a key productprinciple that we followed,
which is, essentially, weimplement our solution in the
context of the existingtechnology of the bank and of
the partner that they want tocollaborate with.
Let me give you a pretty simpleexample.
One of the implementations thatwe have done is a bank
(16:14):
partnering with an e-walletcompany.
The e-wallet company has alicense to issue an e-wallet,
which means that they have donekey components of the KYC for
this customer.
So the bank doesn't need thatpart of our solution.
What it does is to create auser journey which is
integrating with the solutionthat this e-commerce partner
(16:35):
already has.
And that is something againthat, because we have this
holistic view of the complexityof banking and the service and
the fact that people are stilldiscovering how to do it right,
we've built a product in a waywhich is essentially compatible
and it gets deployed in thecontext of that use case.
But yeah, it's something whichis evolving and you cannot have
(16:57):
a one-size-fit-all approach,especially in this market where
people are still kind ofdiscovering different components
.
Rachel Morrissey (17:06):
So when you are looking at being a white
label and you're feeling likethat gives you a lot of
flexibility in the solutionsthat you're able to offer, what
do you think that your originfrom starting to charge banking
as a service proposition?
How does that influence theimportance of embracing those
(17:29):
emergent technologies Like, whatwas it about that experience
that allowed for that?
Sachin Sharma (17:40):
It's a very, very important point, because when
you are essentially looking toenable a completely new business
model, you have to have a freshview on everything, including a
very important component, whichis your technology.
So we really did not benchmarkourselves with other banks.
(18:02):
We benchmark ourselves withFacebook or Meta or with Apple,
with the technologies that thesecompanies use, and our stack
essentially uses a lot of keycomponents which are either
created by some of these bigdigital brands or are used by
(18:25):
these digital banks.
For instance, we use a databasecapability called Cassandra.
It's not very popular withbanks.
Banks are still using PostgresSQL.
Cassandra was created by Meta,by Facebook, and now it's an
open source technology which wehave utilized in our stack, and
(18:47):
it's really fit for purpose.
It's able to process millionsof transactions at a much faster
turnaround time, which is whatis required for this scaled
business model, and banks werenot using those technology.
So I think that's one of thethings you've got to keep your
mind open.
You've got to benchmarkcorrectly.
You cannot be benchmarking toold tech.
You need to be benchmarking towhat the future is going to be.
(19:09):
Another choice that we've madeis that we are cloud agnostic
and cloud compatible, becausethat is something which is again
inevitable In terms ofinfrastructure.
Cloud is going to be theinfrastructure of choice going
forward and therefore we workwith partners like AWS, like GCP
(19:30):
, to deploy the capability, andthat makes a world of difference
in terms of being able to go tomarket faster, maintain your
infrastructure and capabilityand also scale when you need to
scale.
Otherwise, you're strugglingwith procuring multi-million
dollar servers which might notbe getting used at all.
(19:51):
So I think that is the approachKeep your mind open, benchmark
correctly.
Rachel Morrissey (19:57):
What's interesting to me about what you
just said was you didn't takeyour inspiration at all from the
bank.
Not really.
Sachin Sharma (20:04):
Not, really, not at all.
Rachel Morrissey (20:07):
And you were really looking to the other side
.
So when you were looking to theside like Meta or Facebook,
whatever you want to call it,I'm still like Twitter and
Facebook.
I'm so old now it's not Twitteranymore.
Sheryl Chen (20:22):
I know.
Sachin Sharma (20:22):
It's not Twitter.
Rachel Morrissey (20:23):
It's not Facebook.
It's not.
Sachin Sharma (20:25):
It's very difficult to say I X'd you.
It doesn't sound right, itdoesn not Facebook, it's not.
It's very difficult to say X, IX'd you.
It doesn't sound right.
Rachel Morrissey (20:29):
It doesn't sound right.
I mean I'm like, oh, I don'tget it Anyway.
But so when you were lookingfor that, you were looking
forward to these kinds of thingsand you were really looking to
be more on the tech side ofthings, which makes sense.
But what do you say to some ofthese banks that you work with
about being forward like thatand how do you work with their
(20:53):
technology?
What was it about yourexperience at Standard Chartered
Banking that sort of gave youthe chance to be this middleman.
Sachin Sharma (21:03):
Yeah, so what you have to appreciate is banking
is a heavily regulated industry.
Yeah, so what you have toappreciate is banking is a
heavily regulated industry.
Yeah, what that means is thatthere is this certain natural
resistance for introducing toomuch change at one time.
There is also for good reason.
For very good reason I've beena banker for 20 years.
(21:25):
I understand the complexitythat bankers have to deal with.
Very good reason I've been abanker for 20 years.
I understand the complexitythat bankers have to deal with.
Um, for good reason, over time,components in the technology
stack have been added.
So you, if I'm a cio, I'mlooking at a stack which has
been built, let's say, over thelast 30, 40 years.
Nobody really completelyunderstands that.
And now, if you ask me that youknow change a big portion of it
(21:45):
.
It's a big thing, right, it'sa's a big, it's expensive, it's
complex, it can impact yourcustomer experience.
So our strategic approach isnot to upfront go and tell banks
that, hey, you know, your stackshould be replaced wholesale.
What we implement is new usecases where you're going after a
(22:08):
new customer segment or you'reimplementing a new business
model.
So I want to launch a digitalbank which is happening all
around us in this part of theworld.
Or I want to introduce abanking as a service platform
and go after partnerships as abusiness model.
That's where we implement anend-to-end stack which coexists
with your existing technologyand, over time, it gives you
(22:31):
confidence to say hey, you know,everything is working really
well on this side of the newstuff that we've done.
Now can we start migratingcustomers and products onto this
new stack and getting rid ofthe cost on some of our old
capability?
That has been our strategicapproach, which has been quite
well accepted and, honestly,even if I was still on the bank
(22:53):
side, even I would be reluctantto implement some of these major
projects while running the ship.
I don't want to change theengine while running the ship.
I might as well build aspeedboat right next to it and
see how fast it goes.
Sheryl Chen (23:06):
So you just now you talked about how your platform
allows for open data.
Right, I wanted to just pivot alittle bit and ask so because
Rachel is here.
You're seeing the trend of openbanking really take off in the
US and in Europe.
Rachel Morrissey (23:21):
Right.
Sheryl Chen (23:23):
So how are you seeing that trend happen in Asia
?
How is it playing out here?
Sachin Sharma (23:30):
Directionally open banking is something that
is going to happen in all themarkets.
The question is is there goingto be a clear regulatory
framework in each of thesemarkets or is it going to be
market-driven, where theindustry players are deciding
what the structure is going tolook like?
Where the industry players aredeciding what the structure is
(23:51):
going to look like, the goodnews is that you have PSG2 and
GDPR as reference points ofregulation and we've built a
stack with that regulation inmind.
Wherever there is a regulatorwhich actually introduces an
open banking platform, likeIndonesia has done two years
back, their regulation is calledSNAP.
(24:11):
It's essentially aconsent-based API data sharing
framework.
It is also referencing the bestpractices of GDPR and PSD2.
So, again, from our platformpriorities perspective, we have
the right benchmarks.
So, again from our platformpriorities perspective, we have
the right benchmarks and webelieve we can easily roll this
out for markets where there is aregulation which is already
(24:34):
published and where there is noregulation published, we can
consult with the industry andwith the banks and the
regulators to show them the wayof doing this right.
Rachel Morrissey (24:54):
And this is going to be interesting because
in Europe, like you said, theyhave the GDPR, they've got these
regulations that are all set,and then the other side of it,
in the US, it has, until thispoint and until this year,
basically been very marketdriven and there's been a huge
amount of adoption throughmarket-driven.
But it isn't universal andthere's lots of reasons for that
.
What markets in Asia are you,when you look at what markets in
(25:15):
Asia, do you think wouldbenefit more from a more
regulator-forward approach, andwhich markets would benefit more
from a market-driven approach?
Sachin Sharma (25:27):
benefit more from like a market-driven approach.
The honest answer that we thinkis everywhere the regulator
defines the path forward.
It's easier Because there canbe two outcomes of a
market-driven approach.
One example is China, where yousee, and financial and WeChat
(25:51):
essentially run away withinnovation and lo and behold,
15% of the population is nowusing WeChat and Ant Financial,
and I'm talking eight years back, 15% of the population was
using it.
When you come to that point oftime, the regulator has very
little option but to kind offollow and align to that market,
because the growth has been sofast, the adoption has been so
(26:12):
fast.
But more often than not, whensome of these technologies scale
, that's when the regulatorsteps in and starts asking tough
questions, which is what ishappening in Europe right now.
So you know there are a lot ofbanking as a service.
So open banking is a littledifferent from banking as a
service.
Yeah, open banking is focusedon consent based sharing of
(26:34):
customer information and consentbased debits in the customer's
accounts.
Open banking is about creatinga financial product.
Oh sorry, banking as a serviceis about creating a financial
product in a non-financialentity.
So they are two slightlydifferent things.
And on banking as a service.
We do see EU regulators nowstepping in and asking tough
(26:59):
questions to companies whichhave been operating in this
space and have been innovatingthat.
Who has the responsibilityaround the customer's data,
around the KYC, around thereporting?
Now, our approach again was toalways meet the highest possible
regulatory standard from dayone and also to engage the
(27:20):
regulators up front, because weknow, at least in this part of
the world, the moment you startscaling, the regulators are
going to step in and ask youthose tough questions.
And when they ask those toughquestions, we already have the
right answers and the rightbenchmarks and the right
principles of implementation andthe right controls around data
(27:41):
and transactions to satisfytheir requirements.
So I think it's always betterto have a regulatory-led
approach, but I'm a regulator.
I have 100 things to deal with.
I deal with it when it scales.
Rachel Morrissey (27:58):
Which makes sense.
That is going to have to be itfor today.
We have to wrap up.
Thank you so much for joiningus.
We've had a lovely discussionand I just want to say to all of
our listeners thank you fortuning into the Money Pot.
If you want to be part of MoneyPot at the show, email us at
podcast at money2020.com andgive us your best ideas and
(28:22):
please give us a review whereveryou listen to us.
We want you to know weappreciate you.
We love our FinTech nerds.
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