Tuum Talks Episode 6: Converging on Prosperity: Accelerating Digital Transformation in Financial Services

Welcome to Tuum Talks Episode #6: Converging on Prosperity: Accelerating Digital Transformation in Financial Services

Recorded Live: Thursday, May 23, 2024
Host: Edgardo Torres-Caballero, CRO at Tuum
Guest: João Sales Caldeira, Partner at Deloitte

In this critical discussion on the future of financial services, Edgardo Torres-Caballero and João Sales Caldeira explored how digital advancements are reshaping the industry. This episode provided a deep dive into the strategies and technologies driving the digital transformation of banks and financial institutions. 

Our Speakers Discussed: 

  • The strategic imperative for banks to deploy dedicated full-time resources to manage transformation efforts effectively. 
  • The complexities of simplifying operations in a technologically advanced environment. 
  • João’s insightful reflection on the essence of digital transformation being more than technology; “It’s all about people at the end of the day.”

Key Takeaways Include:

  • The integration of advanced digital tools to enhance efficiency in banking. 
  • The importance of clear and focused project management and dedicated staffing for successful digital transformation. 
  • Challenges and strategies related to simplifying operational processes in financial services. 
  • Financial planning for technology investments and the balance between short-term costs and long-term gains. 

Special thanks to João Sales Caldeira for sharing his extensive knowledge and insights, and to all our participants for contributing to a dynamic discussion.

Stay Tuned for More: 

To keep abreast of the latest in banking innovation and future episodes of Tuum Talks, sign up for our newsletter at the bottom of this page. Join us as we continue to bring leading voices and perspectives to the forefront of the fintech dialogue. 

Watch, read or listen to the conversation below:

Converging on Prosperity: Accelerating Digital Transformation in Financial Services

[Full Transcript]

[00:00:00] Edgardo: Good morning. Thank you for coming on the show. It’s a pleasure to have you.

[00:00:07] João: Happy to be here.

[00:00:08] Edgardo: Outstanding. Just jumping off to the point, why don’t you tell us a little bit about yourself, your experience at Deloitte? Just spent over two decades or more as a consultant. One of the most important things, which you believe, consulting has changed in recent times from your experience. How is this impacting the financial services space?

[00:00:32] João: Thanks, Edgardo. I’m João, I’m consultant for more than 25 years. I’ve been in Deloitte for more or less that time. Always worked in financial services. I lead our industry solutions practice focusing on core banking, core insurance. I also have a global role about that; I manage all our digital banking platform solutions globally, in that space working with the ecosystem with many players.

I think over time we’ve seen a shift, around 25 years ago a lot of our business was advice. It has really shifted to, we still do a lot of advice, but then implement and operate. We shifted a lot in terms of the breadth of things we can provide to our clients. At the same time, it’s evolved from consulting being a business where there were knowledge asymmetries, and now our role is more of knowledge integrators.

At the same time, we’re capacity providers, and now we’re being more delivering certainty and value for our clients. There has been a lot of shifts, and will still continue to happen in the next few years. It’s fascinating work we’ve seen and certainly for the financial services industries, all of this that I said have applied to our clients, namely banks, which is the focus of the conversation today.

[00:01:53] Edgardo: Definitely. Within this this shift, we know and Deloitte is being known for having launched some time ago, Converge Prosperity, as an example of those things where you’re taking a broader role in defining and helping these institutions integrate proper solutions on financial services.

What can you share about Converge Prosperity, particularly in the scope of what you’re doing in Deloitte Portugal, and some other European markets?

[00:02:23] João: Yes, we’ve been in the past decade or so, very close to all of the fintech community and all of the investment that we’ve seen in the marketplace. Deloitte also made a lot of investment in assets and IP over time. We’ve seen the whole digital transformation process happening in the past 5 to 7 years. Certainly, we’ve made a big investment on something we call Converge Prosperity Banking Suite, specifically for the banking sector, where we are coupling a curated fintech community with our own IP and also modern cloud banking in an offering that we can take to market. We are taking this to market globally, where we couple a cloud foundation with NextGen core systems, with a group of fintech providers that helps us extend what we need to have in a composable banking approach, but also an experience layer.

In this sense, we can take any challenges that banks have today. This can be like launching a new digital proposition. It can be building a bank ground up, or it can even be a transformation of a more traditional organization in a progressive way. Instead of doing these things that will take years, we can do this in months or even weeks if we’re talking about launching new propositions.

The value we can bring with this thing, not just coupling the technology but also our business knowledge, is what helps us accelerate the value for clients by using this offer.

[00:03:51] Edgardo: Within that context, do you think banks are modernizing fast enough? Because you created these accelerators, there’s a wealth of experience, you undertake implementation so there’s a lot of knowledge how to de risk implementing new technology. But are they embracing this and moving forward with these initiatives?

[00:04:13] João: I think generically speaking, and when we talk about banks there’s many different segments and sizes of banks, and regions and all of that needs to play the equation. But generally speaking, I would say that in the last five years, bank has really invested a lot in digital transformation, but potentially more on their, engagement layers, front ends. All of that has to do with accelerating customer interactions, and really be good at that.

That has been the bulk of what banks have been doing, at the same time, investing a lot in their data capabilities. But now, of course, investing even more with the event of Gen AI and other things that are now available, and maybe they’ve left a little bit of the middle to back office investments to a second stage, which they are now feeling that they need to also evolve on that front.

Different speeds of investment, but yes, I think they all recognize the need to do it front to back, but maybe not at the speed or with the value that they can provide. They’re still sitting with a lot of legacy in most of these. Larger banks certainly, middle to small size, they can access some new technology and maybe it’s easier to do it in some cases. But yes, I think it’s an ongoing challenge ever.

To look at this as a new normal of always be in a transformation mode, and not really transformation as usual; we believe it will be the new normal for banks and financial institutions, generally speaking.

[00:05:48] Edgardo: I fully agree. I think transformation becomes, I love the concept, a new normal. It’s just business as usual. It’s a continuum in that sense. But you brought a very important point, which is the broader, more complex systems in the early days have been pushed back. All the channels and the front end of these different things, because of the value it brings for the interactions with the end customers, so big investments have been put in there. The issue is then when they want to launch new products. That may touch on their core banking systems, enabling them to do more things and even hosting these things in the cloud, leveraging applications that they can natively consume out of the cloud, launching even multi entity operations in different jurisdictions and on all systems, we know the limitations this may have.

What is your experience on that space? I think Deloitte is one of the leading companies in the industry when it comes to digital modernization, and even core banking implementations. What can you share in relation to your experience, and maybe even a word of advice for some of these banks that are even considering looking for new technologies and digital core banking capabilities? What would be your recommendation for them at this stage of this?

[00:07:03] João: Obviously, I will not mention any client names, but we’ve helped clients modernize their systems in a multi country fashion. Some of those, even in a single instance to support multiple countries, typically with similarities in terms of regulation, because then you have to count all of the local specificities, and it’s always very difficult to then accommodate that in a single manner. Of course, data residency is also an issue in some countries. We have done and we are seeing increasing the appetite for banks to look at that.

I mentioned Converge Prosperity Banking Suite is one of the ways in which we are helping accelerate that transformation, and also make it easier for banks to make these decisions, because these are decisions that take a lot of time to make considerations. Creating a case for change in a lot of situations is not easy. The amount of investment required sometimes is overlooked. These problems tend to take a lot of time and consume a lot of internal resources and external resources from the banks. They need to have a lot of resiliency to make sure that these get done until the end, because to be able to recognize benefits you need to get rid of and decommission some of the old platforms you have. This means the journey does not end on MVP. It starts on MVP.

The difficult part is going from MVP to the full end of that transformation. That cannot be overlooked because that really is a big investment that banks need to make. If they have technology assets and IP available in the marketplace that can help, de risk and accelerate that innovation, that’s how we position to them and how we pitch to them.

[00:08:51] Edgardo: Within that context, and I definitely agree, I think some institutions have taken the path of looking at endpoint solutions for specific business units, not necessarily big bang approach all across the board, and that allows them to progressively transform as you’re suggesting. What routes for migration then would you advocate? Because some of these institutions that we’re talking about, it’s a life-or-death decision at times. They need to compete within certain segments. Even larger organizations at times, they might be commanding the market in certain segments, but they are lagging behind on others, and that pushes them then to have a lighter, faster-to-deploy technology so they can position the products.

What can you share with us in relation to that, possible routes for advocating for gradual implementation of technology, that may progress this and eventually compound into a broader impact?

[00:09:49] João: Firstly, this is not just a technology decision. This needs to be, I think, firstly, a business decision. When looking at that, you need to look at path to value. These programs need to generate value quickly. They need almost to an extent to be self sustained going forward. You cannot wait years to achieve value on these migrations and all these big transformations. We need to create a model where you will generate this value.

We’ve seen circumstances where you would potentially launch new propositions to markets, and this will generate for new segments or for new lines of business. This is a way to go; it’s to create that new proposition in the market. At the same time, you need to work on simplifying the operations of these banks, because simplicity is sometimes very easy to say, very hard to do. You need to have the mindset and the direction from the shareholders and the executive committees and the governance of the organization, full sponsorship to make sure that we can simplify the business because. We often see programs fail because that is not there.

We think that you need to have that guiding principle and be on point to make sure that you can simplify. Then you can do like the sidecar approach. You can do migrations per business line. There are many ways to do it. We don’t often see big bangs on this thing; no one goes for the option anymore. You could do credit card migration in one go, and sometimes it’s more efficient. What you need to recognize is that by doing that, you’re also going to add complexity to the whole ecosystem during the process, because you need to think about coexistence and all of that challenges that you have, and even the impacts on business around what do I do with my branches, what do I do with my digital channels, what do I do with all my engagement layers?

That comes into play because for a period you will have more complexity, and then more simplicity going forward. We need to endure a little bit on that front.

[00:11:54] Edgardo: That’s very good. I know João, you also extend the capacity of your operations, and you have certain level of expertise in core banking out of your operations in Lisbon. What is your experience beyond Lisbon or Portugal in that sense, into other markets where you’re involved? What are the trends you are seeing overall in the UK market, the European side, even the Middle East where I know you also advise in some operations over there? What can you share about that market dynamics? What is happening in the Middle East? What do you see happening in the European side?

[00:12:29] João: Thank you for that. We have a centre of excellence for core banking and digital transformation in this market that we operate globally. Across the regions you mentioned and others, we are supporting transformations for banks in those regions, coupling the local in depth knowledge about what’s happening in the marketplace, regulation topics, and also business specifics, but also with the depth of capability that we can bring. We can also couple that with our more delivery-centred capabilities we have across the globe.

We have a role to play in this. You talk about Middle East or you talk about UK, those two examples, very different market dynamics. We haven’t seen a lot of new banks in the UK in the last hundred years, a couple or so. But we are seeing a consolidation trend in the UK market right now. Definitely there’s a wave of these things happening right now unannounced in the marketplace. That means for these acquisitions to realize benefits, they will have to do something.

In many areas, their systems is one of the things because we often see in the past consolidations happening, and banks sitting with two, three, four, five of these systems, doing the same thing, and very difficult to consolidate them. I think there’s an opportunity there to look at this space.

Whereas in the Middle East, you still see a lot of new entrants and a lot of new digital propositions, digital banks opening up to market to attract new segments. The population is also growing a lot. There is a lot of investment also in digital propositions. Two completely different markets in terms of the dynamics and what’s happening. But for companies that are investing in technology and can provide these services, I think this is a fantastic era.

[00:14:18] Edgardo: Outstanding. Maybe a word on the fintech space and neos. I know also Deloitte has been driving some of the initiatives all across globally. What has been your experience on that space? We were talking mostly about more mature institutions, migrations and their issues that they have from Legacy, but what about the neo ones and your experience and in recent times and going forward? What are the plans there for Deloitte?

[00:14:43] João: We’ve worked with many of these neo banks, institutions, helping them to set up their operations from ground up. We’ve done things like all of the process to apply for a license in the central bank. We do that. We create their business case, we create their operations, we even in some markets help them hire the people, define their target operating model, implement their system, select their systems, and all of that. We can be an end-to-end transformation partner for banks that want to start their operations. We’ve done that in the Middle East, we’ve done that in Africa, we’ve done that in Europe, we’ve done that in the Americas, we ‘ve done that in Asia.

This is one of the things that working with a firm like Deloitte, the capabilities we have can help clients end to end, because if they have a challenge around, how do I set up my, structure, what is the most efficient tax way in which I can construct it, we can help them; or what requirements I have on cyber, we can help also on that component. There are many areas that we can couple that knowledge and make sure that that nothing is forgotten. Because when you’re opening up a new operation, you are opening up also for the scrutiny of a number of things, including regulation. It is paramount to make sure those things are not forgotten.

Technology, we can bring that and we are bringing that with Converge and also other propositions. We can accelerate that process. Most of the times we are seeing now that is not on the critical path of launching a new proposition. It is no longer the technology that will have an impact on that. The process of getting the license, getting the processes ready and making sure all of the certifications are done, that is now what is in the critical path of opening a new proposition.

[00:16:35] Edgardo: I love this topic they’re bringing. Maybe what do you see are key factors that lead for successful projects? You’ve seen the larger banks, you’re operating with new ones, helping them set up their operations. Maybe if you were able to consolidate, there’s so many factors, but into few key points that define success for your projects, what would that be?

[00:16:57] João: I think to have the right mindset, the right attitude, the proper leadership vision from the organization from the bank, it all starts there. If you don’t have that alignment between the parties that are involved, it might be two, three, four, five, ten, twenty, sometimes even more different companies involved, you need to have the right attitude and mindset of what’s happening, the proper expectations set up front and clarify what the expectations are. By expectations I mean timeframe, scope, and cost. All of that needs to be put in context to understand what will take. Then be fierce on the guiding principles that program has, and fierce on really understanding what are the value drivers for that program. Always have those in mind.

If the value is I want to have something that will reduce my running costs of my existing, mainframe platform or whatever, because that’s a big cost, that’s the focus. But the focus might be, I want to be agile to launch new propositions to market, or I want to enter a new market, or I want to have a platform to support multiple countries at the same time. There will be multiple ways in which banks will address this challenge, but they need to be clear of what those are, and they need to enforce and communicate to the whole organization, we are doing this.

At the same time, resources need to be allocated. I prefer to say it’s better to have full time resources, than part time resources times X, which basically means you are not focusing on transforming your bank, your organization. Focus is paramount to make sure that things will happen.

There are books about what works and what does not work. We’ve done many reviews and projects that we have a whole set of do’s and don’ts of what works well and what doesn’t work well. From top of mind, these would be the first things when I have discussions with clients that I make sure that they understand what they need to do also. Because it’s not just who helps them, firstly it is what they need to do and the mindset that they need to have to make sure this works.

[00:19:26] Edgardo: That definitely makes sense. It’s all about people at the end of the day. When you commit to something like this, the proper resourcing of it and the journey that you’re going to have to endure and go through is definitely important.

But one point on that one, which I think some of the audience are participating on and our sales staff, is this cost structure, this discussion about cost. I have the feeling that at times when you want to transform, maybe even touch on migration components, the cost might even increase on a short term basis. Once you optimize the entire operation, maybe people, process or technology, you end up then having the benefit down the road. The ROI happens eventually.

What can you share in your experience? Because you’ve seen so many different flavours off initiatives. expectations from some of our prospect clients can be managed. I have the feeling that you need to budget this properly. If you want to optimize, the budget for optimization might go up, but eventually then you get an ROI. What’s your experience there?

[00:20:33] João: I think at the end of the day, this is a CapEx versus OpEx discussion. The traditional model to do it is, you will have CapEx investments over a period of time, and then OpEx will run lower than the existing OpEx that you have in the organization, meaning it might be infrastructure, it might be services and internal people. That’s the traditional plan. But we are now seeing increasingly ways of funding of these programs that do not really create a big hump in terms of the investment curve. There are ways in which this can be smooth over time, and transfered to a later investment curve.

This can range from a traditional, like I said, there’s an investment up front, and then you reap the benefits afterwards. As I also said previously, these programs need to also fund themselves a little bit. If the focus is solely cost reduction, you can still do it, but you’ll probably have a hard time justifying business cases to do these things. We really need to have a business angle. If you can generate new business around creating new value propositions for clients, new market segments you’ve got to enter, then it will help the business case massively because the curve will start to have a better behaviour earlier in the phase.

We also see structures where companies will also invest and partner with banks to make sure that this is a shared investment. That is also welcome. We have entered into these discussions with clients around truly partnering and making sure that we can also make our investment, but also the benefits we’ll also collect them together at a later stage.

We are seeing this in the marketplace, and I think banks are increasingly welcoming these new ways of transforming. We have an offering called Operate to Transform, where we take the operations, we transform them, we give it back to clients after a period. This has a completely different financial model.

[00:22:51] Edgardo: You read my mind on that one, which is you may even take over an operation. You’re footing the bill, but in a way you turn that into a business. This is the things that Deloitte would also undertake, I’m understanding. That’s very nice.

By the way, for the record, I’ve been taking some of the audience questions and merging them within the conversation. I think it will flow. Some of these questions are coming from the audience, and I’m mixing them up with the ones we had for you. Some of these questions have to do with the discussion now. One of the questions was, what is the biggest reason, and I guess it depends, but that project may go bad? Or maybe if there was a single reason that something goes right, you answered it by not being synchronized and resourcing projects, but maybe out of your experience, what is the big no-no that should be addressed early on, that people get it right in a sense? At least saying to be close to success in a way. This one comes from the audience.

[00:23:57] João: You have multiple reasons why these programs fail. Not to have the risk of saying it’s now death by a thousand cuts, there’s too many of those. I would say management of these programs to be the number one reason why problems fail – management in the broader sense. This might be internal management, might be management of the whole program with different parties. That’s one of the reasons. The second reason has to do with expectations management, and clarification up front of what it will take. If I’m getting into a journey and I don’t know what the end of that journey is, and it’s not clear what that is, then I’m not going to get there. That’s number problem two, or in some cases it might be the other way. But I think those are my top two reasons why.

[00:24:55] Edgardo: Definitely. I think, as you’re mentioning, it goes beyond technology. Technology works on anything, it is black and white.

[00:25:05] João: It’s always about people. It is not because system A or platform B is not fit for purpose. That’s often not the reason. Although it might also be a reason, it is not often the reason or the key reason. We need to be honest with ourselves; this is about people.

[00:25:21] Edgardo: Awesome. I fully agree on that one.

There’s a question about, if you have ever seen an established bank launch in a successful way a neobank, basically this is a speedboat coming from a large bank, from all these years, and this might be non-Deloitte based initiatives. Which one would you call out as a successful neobank coming from an established organization?

[00:25:47] João: I think we’ve seen many established banks in many markets launch new digital propositions on the side to typically attract young population, for example. There are many examples of this. We have this in my market, two or three successfully launched. By successful I mean they’ve been in the market, some of them for more than 10 years.

Some of these banks still lean on the legacy technology, although we’ve seen propositions that have fully been launched with new tech. That’s why we say Converge Prosperity can accelerate some of these. If I launch a new proposition, I want it to be lean. I cannot have these operations running at cost to income ratios of 50%+. They need to operate at 25%. But we’ve seen banks like Centum, they’re launching open bank. We’ve seen other banks launching their own digital propositions to attract certain segments. We’ve also seen this on the insurance side.

I think yes, it has been a trend, and they’ve captured a lot of market. Typically, these are banks that offer propositions that are much more interesting for clients because they will offer for, young segments fast payments, they offer day to day banking, which is much more agile, more fun to have. That’s what they are attracting in the hope that they will be their future customers and the future customer base. The numbers are not in around how much conversion can they make on those new segments around how much business they’re going to make in the future with those clients; I think it’s too early to say.

[00:27:22] Edgardo: That’s good. I can share also a view on this. I’ve seen institutions such as BBBA get involved in the space and launch specific to your point, which very well addressed, unsecure lending joint ventures with other telco companies, as an example, very successfully in the market. They use proper technology and they launch lean organizations to make that happen. It’s just endorsing what you’re saying. There are a few important cases where these has worked really well. This is not replacing their existing business necessarily. It’s complimenting, reaching out to segments that were probably too heavy with the existing operations or infrastructure. There’s definitely some cases.

[00:28:06] João: You see this as adding new business, embedded finance, as you were talking about, that’s certainly a trend. This means adding a business. It means exploring the opportunity. It means also putting yourself out in terms of a little bit of risk management, because when you’re doing these things, you are opening up a little bit your risk management profile and credit risk around that, but still manageable for a large bank to do it. If it’s a new one, then it will be a little bit more challenged to make sure they have the capital to fund the operation. But definitely a trend.

Banks are increasingly exploring also the ecosystem of partners. Fintechs is one thing, but the other thing is the whole plethora of other companies that they can work with. We are seeing a lot of this, and we are helping some banks in the business side of that, what to do and how to do it. We’ve launched propositions. for banks using our platforms to support, for example embedded finance offers for banks. In my market, we’ve done this for two banks.

[00:29:10] Edgardo: Very nice. I have two other very important topics. I’d like to begin with the talent. You mentioned it’s all about people; finding the right resources, the people you need to implement this initiative. I know you historically also manage very large teams from your operations.

What is the key to attracting key talent and retaining them? Because ultimately, you also want to make sure you can come with them for the longer term. Some piece of advice on those things have to do with talent. Ultimately, as you said, successful initiatives, management and expectations, people, but then you need the right people for that. What can you share in relation to talent and retaining talent?

[00:29:50] João: Great question. Deloitte globally more than 400,000 people, so we can fill some football stadiums. A big challenge that we have on attracting talent, but also the right talent with the right mindset and attitudes, one of the things we can offer to our people is naturally the fast pace of learning that they will have. Over time, we hire a lot of new joiners, a lot of graduates from universities globally for all of the backgrounds, from engineering to management and other areas.

What we offer in terms of the journey and the path to excellence and the path to competence is unique, and the opportunity is there to make sure that happens. At the same time, we work in the most complex transformation programs with our clients, and those are challenging, but they’re also very rewarding for our people. This is the experience we offer. It’s not for everyone; some people like to do other things today and they want to do technology in a different way. But we are at the forefront of investing in innovation and technology; we also have that available for the most innovative people, the innovative teams.

But a lot of things we do, not just to go and look for where the talent is, we’re doing things like opening up offices of Deloitte near locations where we can find the right talent, so that they can also stay in those communities, and give back a little to society in terms of making sure that community now has a pool of talent in technology or business. That pool of talent is available to serve the world from that location. We do many things around this. The investment we make in attracting and also curating the ecosystem of universities that we work with, is amazing.

[00:32:00] Edgardo: I can attest to that. The last two weeks I was traveling in the Middle East I met with some of your colleagues, and they’re from your operation. We met them in the Middle East and they’re engaged in multiple different countries in the region. That’s amazing. I think you’ve managed to export talent in a very significant way. We also know you are present in the African market. We already spoke about the European side and the UK.

Now, you mentioned something important, which is the innovation, and Deloitte’s investments on the innovation. A very big topic, which is the second one I wanted to address is artificial intelligence. Everyone is discussing this, there’s a lot of hype in relation to this, especially with the big investments coming from the Googles and very large multinationals in the space. There’s curiosity about how do we apply this in banking. What does it really represent?

Even for efficiency components, for boosting productivity, or maybe even for replacing existing systems that today we do in a certain way, maybe artificial intelligence can undertake this task in the future and changes as a paradigm. Even core banking, the way we produce a core banking platform. What can you share? What is globally speaking, Deloitte’s commitment to AI and investing on AI, and the initiatives that Deloitte is involved in AI space?

[00:33:29] João: I’ll talk about AI and then Gen AI. We embraced artificial intelligence many years ago, and we understood quite early on that data is paramount and every organization, not just banks, every organization will leverage data and can leverage data in a completely different fashion when the technology is available to do it in an affordable and fast way. This means having the ability to process large amounts of data in real time. 10 years ago we knew that this was a trend, but the technology was not there to support it.

We may say, everyone is talking about this, every organization in the banking sector, every bank, a lot of people talk every day and we have conferences about this. You might say on one hand that, this might be a little too much, everyone talking at the same time about this. There’s a trend about talking a little about that. There’s also the other spectrum about, what safeguards are we putting here? How safe is this? That’s dark side of Gen AI and what’s going to happen.

What we think is that this is a transformational aspect at the core of the organizations and naturally the core of banks, and they need to approach it from a holistic view. First of all, the people. The processes and the technology need to be seen in an integrated fashion, and not just I will do this use case or I will do that use case, tell me how many use cases you have. You can do that, but that’s not really changing the core of how you think about that, how you think about interacting with customers, how you think about reorganization of your entire operation end to end.

The availability now of the technology and also the models that can be put in place allows banks to rethink how they do business. I think that’s the right mindset to have. There is no silver bullet to say, this is the way to go or that is the way to go. But what we are doing right now, even with Converge Prosperity, I’ve mentioned, we are including a lot of this at the heart of what is available in terms of models to support the business.

I think the mindset should be that. It is hard because everyone wants to be the first mover, everyone is on top of things. Ultimately, in the community, they will learn from each other about what’s happening, and evolve based on that. At the same time, we’ll see regulation kicking in certain parts of the world to make sure that we have an ethical Gen AI proposition and technology available and we have the necessary safeguards around that, hopefully not too strict. But we see typically the banking sector, financial services industry, to be very strict in terms of regulation in many areas. That’s typically a burden for the organizations that consume a lot of costs. I think this will be one more, layer.

[00:36:53] Edgardo: One more layer in the process. Now that you mentioned that, which I think is an absolute requirement for us to discuss, is your view on regulation around all these different things that we’ve been talking about. There’s a maybe a baseline experience, the UK and the European side of the house. Because some of these speedboats and transformation initiatives, PSD2 which is now turning PSD3, and there were a bunch of different investments and initiatives. Now we’re seeing the Middle East quite active; those economies are healthy, they have large spreads. They’re investing money, transforming. One regulatory side, looking at that residency, some of them are opening up.

We already know there’s additional clouds that have negotiated to deploy in Saudi, for example, which is a market that was and continues to be a requirement. But then also on the European side, looking at PSD3.

Overall with the region, because you cover multiple different countries, what do you see as a trend? What’s coming? What are the challenges we need to face and address and be aware of in the regulatory space?

[00:37:59] João: First of all, I’m not a specialist on the topic. I have many colleagues in satellite that are specialists in regulation and what’s coming and all of the topics, ranging from risk management to payments to many other things, capital requirements and all of that. I think that’s it is a necessary burden that banks have, given all that’s happened in the past 20 years in banking and the financial sector. We don’t see the wave of regulation slowing down. We see many new things happening around that topic.

That’s something that we might see that as a burden at some point, but we also see it as a way in which banks can communicate to the market, to the regulators, the shareholders, the customers, the partners, that they are operating in a fashion that is ethical, that is adhering to the principles, and that is financially sustainable. That is a wave that will continue.

Naturally, when you think about strategic investments versus regulation investments, if I can put it like that, some of these things have slowed down the strategic investments that banks need to do, because they have an unlimited capacity to invest. To that extent, creating a level playing field between all players in the marketplace, in some markets some of the more established banks would say, all of these new guys, they don’t really have to cope with all of the burden and we do. To an extent, they are right. But at the same time, it’s the work of the regulators to make sure that everyone needs to comply and needs to follow the same rules.

But the point here is, I think the investment capacity to do strategic investments that drive customer expectations, which are increasingly bigger, I think gets a little bit limited from the amount of investments that you have to do. Sometimes they just jump on my annual budget around, now I need to do this and I need to go and see all my data lineage and reply to my central bank about what’s happening on there. I think it’s now a new normal. 15 years ago, it was starting, now it’s already embraced and it’s something you just need to do.

[00:40:39] Edgardo: Outstanding. João, what a pleasure it has been to host you today. We’ve learned many things. You’ve definitely given us a master class today. Thank you so much for your time.

[00:40:54] João: Thanks, Edgardo. Thank you for the questions, and the questions also from the audience. Happy to entertain more.

[00:40:59] Edgardo: I interlocked all the questions through the presentation. We’ve addressed all of them. It’s been an absolute pleasure, João. Looking forward to do business with you.

[00:41:12] João: Thank you, Edgardo. Take care.

[00:41:13] Edgardo: All the best.

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