Why Bunq Banks On The Cloud For An Innovative Edge
Nine out of 10 banks still rely on old-school mainframe systems for their core needs, a technological challenge that can result in legacy financial institutions (FIs) falling behind digital challengers. In our Digital Banks And The Power Of The Cloud Tracker, PYMNTS speaks with Ali Niknam, CEO of European digital bank Bunq, on how combining cloud-based infrastructure, artificial intelligence (AI) and machine learnings (ML) can help FIs scale without getting tangled in legacy infrastructure.
Customer satisfaction is critical in any industry, and that typically means providing convenient access to digital tools.
Losing customers can be as easy as experiencing one too many online glitches, however, which can drive clients into the competition’s arms. Customers have more options than ever in the banking industry, where they can find plenty of digital- or mobile-only challenger banks to replace older financial institutions (FIs) that have failed to keep up with their needs.
That is why it is critical for FIs to build out networks that can handle an increased amount of transactions or swiftly analyze large reams of data, according to Ali Niknam, CEO and founder of European digital bank Bunq. The challenger bank has run on a cloud banking model since its 2012 launch and is available for business and consumer use in 30 European markets, including Austria, Germany and the Netherlands.
“Because we built the whole system up fresh, from the ground up, our entire system is running on the cloud,” Niknam said in a recent interview with PYMNTS. “The [greatest] benefit is that it is just so much more scalable. … Because we are on the cloud, we always have enough capacity, so our users never have to wait.”
Using the computing power that the cloud provides enables the bank to respond to customers’ requests with more flexibility, he continued. It is not the technology itself that is important, however, but the strategy behind it. Banks that are looking to upgrade to the cloud must first take an introspective look at how they are providing services to their customers and if they can fit in an ecosystem where banking is becoming more digital than physical.
Complex Banking Requires Simple Networks
Today’s businesses and consumers have more complicated banking needs thanks to an expanding global economy. Customers want to digitally manage multiple accounts without having to wade through time-consuming login screens or authentication processes each time. They want holistic views of their personal checking and savings accounts alongside their business accounts or investment portfolios in the same place, which means the old assumption that one account is equal to one user no longer really applies, Niknam said.
“With Bunq, one user account results in multiple sub accounts,” he explained. “We do not think in a traditional sense that one bank account equals one user equals one card. Rather, we think you as a user can have as many bank accounts as you want so you can budget easily and keep a good overview.”
Bunq, which officially received its banking license from Dutch authorities in 2014, applies this strategy by offering solutions like Dual Payments, which allows consumers to use one card to make payments from two separate accounts simply by inputting separate PIN codes. This is similar to the card aggregation solutions that fellow FinTech Curve offers. User details are kept in the cloud with the help of Bunq’s third-party cloud provider, meaning the bank does not have to struggle against server limitations and can ensure these switches from one bank account to another are seamless.
“Usage of the cloud basically categorizes [into] three benefits,” Niknam said. “One is the scalability, which allows for [better] performance, … so [one] always has a seamless experience as an end user. [The second] is the added security because obviously, as a bank, security is paramount, and [third], it allows for new technologies to be deployed rapidly.”
The third benefit is becoming critical to the evolving banking industry. Legacy banks are slowly adapting their platforms and innovation strategies in response to these developments while challenger banks continue to sprout all over markets in Europe and the U.S. Bunq is competing with entities like Monzo and Revolut as well as more established European players such as Deutsche Bank and ING, for example.
ML, the Cloud and Competition
It is imperative to examine how newer technologies can play into customer satisfaction. Machine learning (ML) combined with the cloud platform adds a layer of protection to its services, Niknam noted, while also allowing for the development of more customer-facing features.
“We are using ML to link invoices [scanned] through [customers’] phones automatically with payments,” he said. “We are using ML to add an extra security layer to keep [customers] safe. … We have a lot of ML modules running, and actually there, too, having this access to a lot of computing power in the cloud really helps because it allows us to analyze huge, huge, huge amounts of data in a [quicker amount of] time so we can actually deploy these ML modules.”
Using artificial intelligence (AI) and ML goes hand in hand with collecting larger caches of personal data, and banks must first be prepared to handle this flood of information. Events such as the COVID-19 pandemic have shone light on FIs that are able to keep their online platforms running seamlessly with increased digital transaction volume, for example. Banks that do want to stay competitive and stand out during this time will therefore need to go back to basics and create core banking infrastructure that allows for quick, convenient transactions, no matter how flooded the network.