Exclusive Interview with EWALD MÜLLER, MD, Supervision & Authorisation, QFCRA

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Digital transformation is on the rise, what are the key elements of a successful transformation that is required for a legacy bank?

Banks have the same challenge they have had for the past 30 years: the legacy systems issue, where they have a number of systems that do not communicate with each other. It’s amazing how much data banks collect on their customers, but because of this lack of systems integration, they end up without usable information. 

Let me give you an example. A group of mortgage bankers spoke with me about mortgage originators, which were causing them to lose market share. Mortgage, which itself is a loss-leader, is key to banks cross-selling to their customers. I asked them about their cross-sell ratio and the originating product, and they couldn’t tell me. They had separate data sources for credit cards, mortgages, you name it, but because these systems were not integrated, they had no answers.

Legacy banks must address their systems. This doesn’t mean creating a new system, one that won’t communicate with the other systems already in place, but a solution that links their existing data sources.  


According to you, what threats/challenges would traditional banks face with the emergence of innovative financial technologies?

Challenges to traditional banks link back to their legacy systems and a massive investment in bricks and mortar. The new Fintech disruptors do not have these problems, and they can operate anywhere with minimum investment.

A bank’s two distinguishing factors are that it may take deposits and it may be a participant in the payment system. Traditionally, the consumer has needed a bank to both receive and pay out money. FinTech technologies are slowly alleviating that need, which means that the payment system no longer belongs to banks. When your payment system no longer belongs to you, it opens the market to Fintech and Blockchain.

As interesting as this is, I’m a regulator and I have to ask the question, “What threats and challenges do regulators face in this disrupted market?”

Regulators exist to protect consumers, with protection generally focused on those who deposit money. The remit of the Financial Conduct Authority, the conduct regulator for 58,000 financial services firms and financial markets in the UK and the prudential regulator for over 18,000 of those firms, calls for them “to encourage competition.” Encouraging competition falls on the side of encouraging the disruption of the financial services firms they regulate, so it will be interesting to see what they do moving forward.

Regulators have to ask whether FinTech solutions should be regulated and if so, why? Developments such as the ASD Smartcard, where you deposit money on the card and then spend it, make it difficult for a regulator, as the originator is not a bank or a financial services firm.

The way that most FinTechs make money is volume, and all they need is a small piece of a bank’s business to make a profit, as they can operate from anywhere without the traditional investments of the bank. We must also ask where FinTechs would be regulated. The QFC Regulatory Authority regulates authorised firms in Qatar. What happens when financial services suppliers move around and are not exactly located anywhere? How do we determine jurisdiction? These are some of the regulators’ biggest challenges when considering this growth market.


Big techs are shifting to financial services. Do you think such a shift would threaten existing banks? If so, what are the risks that you foresee?

I would say that big techs are dabbling in financial services, testing the market right now, but they are a threat. As they make inroads on the financial services market, they are going to continue to fragment banks’ customer bases, and as a result, banks will lose customers without being aware of it.

A recent Financial Times article noted inertia on the part of UK bank customers to switch banks, but FinTech providers are finding ways to get the traditional bank customer going outside of the bank for certain services. This is a huge threat to banks, as there’s no knowing what pieces of business – and customers – will stray and when.

It’s a grab for market share right now, with technology and other sectors looking at controlling a piece of the business traditionally in the domain of banks. Over time, banks will end up servicing only entries and exits, and they can’t make money this way based on their current model.

Regulators fall into two camps – we regulate conduct and taking money from consumers. The risks that I see from a regulatory perspective are that regulators do not yet know the scope of the FinTech landscape and how traditional financial regulation applies to it. Banks face the problem of clinging to their legacy systems and expensive buildings in the face of virtual banking and customers who are tech-savvy and see a way to save money by trying FinTech providers.


EWALD MÜLLER, MD, Supervision & Authorisation, QFCRA will be speaking at 7th Edition of New Age Banking Summit Qatar.

#NABSQatar #NABS #Fintech #DigitalBanking #DigitalTransformation

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