Canadian Fintech Ecosystem Part 1

Part 1 of The Prime View interview with Arvind Sharma, Chief Digital and Payments Officer at Central 1, a company that builds robust products and services to empower digital banking in Canada.

Arvind, during your career, you have been a part of many large organizations. Can you tell us about your career steps and how it has led you to this point?

I was not quite sure what I wanted to do early in life, but I was always drawn to technology and business and wanted to do something combining these passions.  Thus, I did my engineering degree and then went to business school and completed an MBA. This was fortuitous, as I quickly learned that companies value technologists but they REALLY value technologists that also understand their business.

My first job out of Engineering was an electrical utility called Ontario Hydro, which is a significant technology-centric organization in Canada. At two of their Nuclear generating stations, I worked at developing control systems, robotic tools, and implementing traditional technology like lighting systems for a fuel storage facility. After that, I changed jobs every few years, working at several startups and established companies. 

Eventually, I wound up settling into larger organizations such as CIBC, Manulife, and now Central 1.

What the earlier years of my career taught me was that there are always different ways to skin a cat and by combining ideas from different sources, one can create new innovative ideas.

I’d be the person in the room saying “Why do we do it that way? Have we considered doing it this way instead?” And thus, I developed a reputation for questioning the status quo and being innovative. Another realization was that innovators need to think about the end customer. 

Now it has become common, but you would be amazed how few businesses thought about that in the recent past.

Recently, I’ve been looking a lot at metrics. One of my earlier jobs was in call centers and that environment is one of the most well managed and monitored in the business world with metrics for everything.  Now I spend most of my time in the professional space and the contrast between the two is amazing.  I also wonder what performance might look like with the right metrics and monitoring in place.  

I have thus been encouraging my teams to experiment with metrics. What minimal subset of metrics would focus teams on the things that matter. One of the things we’ve been talking about is the net promoter score in our IT area. How do we contribute to that? How do we impact that? How do we get those in technology out to talk to our customers to understand what impact we have on their lives?  Another metric is “days without incident” – much like the metrics in factories that touch on “days without injury”.

Could you elaborate a little bit about the difference between doing things from the perspective of a startup and an established organization?

If you’re in a growth startup, particularly in building a product, there is generally a lot more work to do than people to do it thus a huge opportunity to do almost anything that requires doing.  In fact, it’s amazing how quickly one learns and grows in these environments just due to the intensity and diversity of the work.  I would encourage people to always be looking for how they can support others in the company and take on more activity, even branch to areas outside of what they’re doing.

Larger organizations are more established and generally have many people with discrete roles and responsibilities. When a new challenge comes to the table, it goes to a particular area. I have seen that many larger organizations are trying to get to a place where people are more empowered, feel they can contribute more and that they can get involved and help with the challenges that the organization has – much like a start up. But this takes time as well as senior management facilitating these changes alongside their employees and organizations.

At Central 1, a lot of what we’re trying to do is to empower employees to take ownership of issues and to help drive decisions and outcomes.

Many organizations are trying to come with a mindset and a way of working that is smaller business-oriented. They used to call it “intrapreneurship”. Agile, in a lot of ways is the manifestation of those capabilities (and many more).  In my experience, if people aspire to take ownership and solve problems, most managers and organizations will be open to that.

Can you compare the innovation frontier in your previous companies to Central 1?

I’ve worked in many organizations and I would categorize them along a continuum of innovation from the most to the least.  The most innovative were fintechs, banks, and then insurance companies.  Even if one did not experience working in these companies, one can see that this makes intuitive sense since each of these organizations think of risk in different ways and that impacted how they thought about innovation.  Fintechs, take on the most risk of these three as they launch, pivot, and develop products. Banks are a bit more conservative and insurance companies the most conservative.  It is after all, in the DNA of insurers to manage risk.  At the time I worked in one, insurers recognized that the banks were adopting and innovating with technology faster than the Insurance companies and they aspired to change that.  I would say they are much closer to that innovation continuum than in the past.

Central 1 is probably the oldest fintech in Canada. We are mainly a product development and marketing organization, running banking digital products in the cloud and have been doing so for decades.  

We are the most advanced on the spectrum (closer to fintechs), in terms of adopting new technologies, capabilities, and practices. That’s because we’re providing software solutions to the market and we have to be ahead of where our clients and their customers want to be. 

At Central 1, we don’t have as many legacy systems like the insurance companies and the banks to move into the cloud. All these organizations now realize the promise of the new and emerging technologies but the pace at which they get there will be determined by customer demand and economics. Can their old system move to the cloud, for example, and if not, will a new one give them that much more benefit in customer satisfaction or margins.  

When I was at an insurer, we looked at our systems and said, what are the modules that change the most frequently (generally due to customer demand), and can we architect those to leverage newer technologies leaving the legacy components that are working fine?  This approach balanced customer-driven demand with innovation. I’ve seen many consulting firms presenting that view so I have to think it is gaining some traction.

The government highly regulates the Fintech industry. How do you successfully combine innovation culture with strict policy compliance?

That is a good question.  I consider adherence to regulation as something that gives us the right to be in a particular market and is thus table stakes for what we do. We can innovate, we can come up with new ideas but at the end of the day, the regulations are there to protect the client, protect us, and to protect the industry and thus we adhere to them.

We have adopted or are in the process of adopting contemporary process envisioning and design methodologies.  These, combined with a multi-disciplinary team, including compliance, allow innovation with compliance built-in during design.  And, before we launch, there’s a more rigorous checkpoint and compliance review. Generally, I have observed a healthy tension between making it easy for the customer and adhering to regulations in every organization I have worked in.  The larger more established organizations have lots of staff that work with design teams while the smaller ones bring in legal advice as required.

The Forge Omnichannel Digital Banking has been on the market for a few years now. What was the most significant achievement of the platform?

It has only really been on the market for less than two. 

There are many achievements. The biggest is probably to pivot away from waterfall methodology as a traditional development organization into being a much more agile organization using Scrum. We have teams and squads that work on developing our products. And 80 to 90 percent of the practices that an agile organization has, we’ve been able to put in place. We have evolved the organization as we were building out the product. Central1 is also adopting many of these ways of working in the enterprise.

The next achievement was to get the product built and out to market. The framework we adopted accelerates development in many ways, but there was a bit of a learning curve for all staff. We were able to hire and train the right people, get them up to speed on this new platform, and deliver the components all while shifting from waterfall to agile. When I say product/components, I mean four products: a public site builder (the financial institution’s marketing site), an online banking site, and two native mobile apps, all of these were to replace a product called MemberDirect ®. Forge is effectively the newest iteration of the MemberDirect digital platform. The accomplishment is that we built 90 percent of the capability in that product into this product, and we “Canadianized” it. 

When I say “Canadianized,” most people do not have a sense of what that is. What it entails is making sure the currency and the language (Canadian French) are properly represented. That is easy.

The hard work is making sure that the product works in Canada with all the different kinds of payment types that Canada has that may not be available in the rest of the world.

For example, an organization in Canada called Interac, which conducts what is known as Interac e-Transfers®. I am not sure if that’s available in that format anywhere else in the world. What happens is I put in your email address to make a payment to you of some amount. You get an email that says, “Arvind just sent you one hundred dollars. What is the password that he told you?” Once you put the password in, the money automatically shows up in your account. There are several payment types like that in Canada that are relatively unique. 

Finally, we built an integration layer that allows the digital platform to integrate into half a dozen different host banking systems. So, in the credit union/small bank market, about half a dozen brands have sold multiple versions of their banking hosts. To support the system, we need to integrate Forge into these banking hosts, and we have done that.

Thus, the currency, language, payment types, and integrations into core banking systems is what we built. We can basically get a bank/credit union that runs one of these cores up and running with a digital presence in record time.

I saw the diagram of the Forge Platform architecture. Could you clarify what exactly the Experience Manager is? 

The experience manager allows the financial institution to change the customer experience, with minimal coding, to what they want it to be by mixing and matching widgets, much like lego.  

One day, we are going to have hundreds of credit unions and financial institutions on the forge platform.

We wanted to make sure that not everything was/is the same for each of them. They should have the ability to tweak the interface and the customer journey uniquely with their customers in mind and do it themselves. The Experience Manager empowers them to do that, and it allows them to develop a capability that we call widgets, which are components. It allows them to arrange the widgets so that the customer’s experience is always evolving and unique. 

The best way to think about that is when you log on to your banking site, you might have a landing page that shows you which accounts you have. When you click on one of the accounts, it will show you what your transactions are. Those are two widgets that exist in our platform. What you may choose to do is put just the transactions and not show the accounts. You can show the accounts on the left and transactions on the right. You could choose to put the transaction on a completely separate page. It allows you to tweak the user experience, even just as simple as how you use online banking so that it is consistent with what you think the customer would enjoy or value interacting with.

Arvind, thank you for your time to share the thoughts from the front lines of the FinTech and banking industries.

Stay tuned for Part 2 of the interview with Arvind Sharma!