Westpac is wrapping a platform developed by Melbourne-based fintech FrankieOne into its banking-as-a-service offering to handle the customer onboarding process, including identity and fraud checks.
FrankieOne is the second piece of third-party infrastructure that sits behind the Westpac banking-as-a-service product after the core banking stack, which is provided by 10X Future Technologies.
Westpac is currently running a test pilot with Afterpay that will allow the buy now, pay later (BNPL) darling to offer its users transactional accounts powered by the Westpac BaaS.
The bank’s corporate and business development general manager Macgregor Duncan told a FinTECH Summit that it made sense to run onboarding via FrankieOne rather than try to build and run onboarding systems in-house.
“Historically, banks have run closed, proprietary banking systems, where they were responsible for everything that went into both manufacturing and distributing financial products to customers,” Duncan said.
“Each stage of the journey around the product and distribution was controlled, owned and developed by the bank. This meant the bank needed to be the best-in-breed around hundreds of different elements of the overall experience, and that has proven really costly and difficult for the bank to manage over time.
“We're increasingly finding ourselves evolving in a different direction whereby rather than being this closed, proprietary, manufacturing and distribution entity, we're looking at trying to be much more open architecture, both from a technology and a distribution perspective.
“That then allows us to integrate the best-in-breed capability from outside the bank in order to then orchestrate the best customer experience that we can for our customers.”
New customers that sign on to a transaction account through a partner like Afterpay will be sent to complete the onboarding journey on FrankieOne’s platform.
“Through a single API, we're able to access Frankie's orchestration of the entire onboarding journey, and Frankie specialises in that,” Duncan said.
FrankieOne presently offers access to ”over 170 different third-party vendors and data sources,” with more added all the time.
This should enable Westpac to bring new capabilities and features online in its BaaS, with all the backend work handled by FrankieOne, leaving Westpac to concentrate on more pressing matters.
“What a bank does is manage really complex regulatory obligations and a balance sheet,” Duncan said.
“That is an incredibly complex set of obligations in and of itself.
“For the most part, the banks do a very good job at that, but that doesn't mean we need to specialise in, in this case. the onboarding journey, or frankly in lots of other aspects of what's needed in order to integrate together a banking platform.
“For us, this does represent a mindset shift that we can have this open architecture platform [instead].”
Duncan said it was important to get the onboarding journey in its BaaS right because this is “the first interaction” with a new customer, and one they will likely remember.
“You want to make sure that interaction is as fast, seamless and efficient as you possibly can, both from a customer experience perspective, but also because from the bank's perspective, we want the largest number of customers to be onboarded that we can,” Duncan said.
For Westpac, the ‘match rate’ is also important. Put simply, this is the number of customers that pass all the different identity verification, know your customer (KYC) and other steps or checks needed to onboard successfully and open an account.
“If we have an 80 percent match rate through our onboarding journey, that's 20 percent of customers that are not being onboarded,” Duncan said.
“If we can partner with someone like Frankie and get that up to 95 or 97 percent, that's an additional number of customers that we're able to onboard, and it's a journey from a customer perspective that's much better.
“In a nutshell, that's why it's so exciting for us to be able to take functionality that we used to manage entirely within the bank and say, ‘we're now going to outsource it to someone who specialises in it’.”
FrankieOne CEO and founder Simon Costello said the company’s platform is a product of challenges it ran into itself when trying to establish as a neobank.
“Originally, actually, [we had] grand plans. Frankie was seeking to be a neobank ourselves, and quite quickly, we worked out there’s one huge mess of challenges that's required in building a fintech,” Costello said.
“Where we started was actually right at the very start, so it was how to onboard a customer most efficiently.
“As it turns out, to be able to onboard a customer, you need to plug into multiple different point solutions, different third parties, and different data sources, both local and international.
“It's a huge piece of work in itself, and that's simply just for individuals. It gets more complicated when it's businesses, etc.
“What we've done is we've gone to some trouble of integrating with over 170 different third party vendors and data sources, all the very well-known companies and everything else inbetween.
“We are obsessed with getting the best customer experience onboard, and then with the new banking-as-a-service projects, what Westpac's been able to do is now select some of this best-of-breed.”