In 2022, traditional financial institutions are prioritising catering to their tech-savvy customers, huge rounds of investment are driving fintech innovation and the industry is bouncing back from the economic impact of Covid-19. Alongside the success of the fintech industry on a global scale, Canada has fared particularly well because of support from strong ecosystem partnerships and sophisticated investors.

Fintech investment doubled in 2021 to $132 billion globally according to CB Insights, spurred by investment in challenger or neobanks across the globe. In Canada, nearly $300 million went to fintechs focused on improving the customer experience. Calgary-based Neo Financial is one of the disruptive fintechs aiming to reimagine the everyday banking experience with cloud services provided by Amazon Web Services (AWS).

Speaking to Finextra, Kris Read, co-founder of Neo Financial, and Pradeep Dhananjaya, banking specialist solutions architect at AWS, explain how fintech companies thrive by leveraging the cloud, and what can be achieved when financial players are no longer burdened by infrastructure constraints. 

How can fintech firms serve ever-changing customer requirements while also differentiating themselves?

Read highlighted how Neo Financial is differentiating themselves by focusing on customer needs and adopting modern technology, including AWS infrastructure and services, to personalise the experience. “We didn't set out to re-build banking the same way it works today. We wanted to re-invent banking. This meant starting with the Canadian customer’s unique needs and redesigning the products from a blank slate, without preconceptions or legacy technical limitations that incumbent banks have.”

In response to this, Dhananjaya explained that Neo Financial has a “unique approach to building banking infrastructure and a constant goal of pushing the envelope technically. By owning the entire stack, they have the advantage of being able to move rapidly as market conditions change. Neo has the luxury of being tech-first with a great engineering team to build and manage the platform.”

Fintech companies such as Neo Financial are avoiding the pain points that institutions experience with outdated infrastructure by building cloud-native platforms. Dhananjaya added that with no legacy infrastructure to manage, fintech firms are “able to build something new very quickly and scale quickly as the user base grows. They are not limited by technology, but are empowered by it, with the cloud enabling them to test out new features and functionality easily, without the need for large capital investments. This lets them be more customer-focused, and ultimately, more successful.”

How can legacy banking initiatives be fine-tuned?

In 2021, Neo Financial announced a strategic partnership with the Hudson’s Bay Company, one of the largest luxury retailers in Canada, to deliver a digital-first credit card for their customers. The credit card programme allows customers to manage their account from a mobile app, including checking balances, automating payments, and earning points for valuable rewards. Neo built the Hudson’s Bay card program on their modern technology stack on AWS. “We wanted to have maximum control over our technology stack, which enables us to make changes quickly as new components become available. Partnering with AWS has allowed us to test, prototype, and build scalable solutions with their expert teams, enabling us to innovate faster and at lower cost,” said Read.

Regarding the build versus buy debate, Read said that “it’s obvious that if you buy software off the shelf, it gets you started faster and a lot of fintech companies or maybe even smaller banking challengers make the choice to go to a corporate software vendor, buy a bunch of systems and try to cobble something together.”

“In taking this route, the best outcome you can get is copying what is already available in market and eventually you hit a ceiling where your ability to innovate is limited, and if you have reached a point where you have onboarded customers onto the platform you likely cannot afford to retool, replace, or change what you built. Then, you’re in this trap.”

 What is true transformation?

Innovation cannot be bolted on to a legacy system.  A truly transformative banking experience is not about “sprucing up a website,” Read said. Everything must be value-oriented, flexible, automated and leverage the opportunities that technologies such as the cloud provide.

In Dhananjaya’s view, by owning the entire stack, Neo Financial has a first-mover advantage and the flexibility to transform the stack when and how they wish. “If you have a specific need, it is okay to take the plunge and consider building something out of the box if that build is going to offer you a specific business advantage.”

Neo Financial has prioritised the usage of serverless platforms due to their inherent scalability, allowing them to scale their services up and down as the business requires. They also use event-based communication. This is particularly helpful during large e-commerce events with high peak demands such as Black Friday.

As Read said, “if done right, serverless systems save you a lot of time and resources,” leaving much of the management of the infrastructure to AWS so Neo Financial can focus on building and growing the business. Dhanajaya added that this way of working is referred to as a microservices pattern, where a large chunk of code is split up into smaller pieces of code that offers specific functionality. “By splitting up the application, you have the advantage that you are able to manage changes incrementally and are able to roll out changes much faster. You are able to scale individual microservices separately rather than having to waste resources by having to scale the entire application.”

What’s next and where the industry is going?

According to Read, finding technical talent with the right mix of development and cloud skills is always going to be a challenge for businesses, especially as we continue to see the demand for tech talent grow alongside increased investments into fintech. Organisations today are therefore looking for talent with the right cultural fit to bridge the gap.

“We’re growing rapidly, which can be difficult with the competition for Canadian tech talent. Hiring has been a top priority, as we’re looking for people who have an innovative mindset and are eager to work with the latest tools to create value for our customers. Our company culture emphasises teamwork, trust, and relationship building to experiment, collaborate, and build great products for our customers,” said Read.

Dhananjaya agrees with Read, and added that the banking industry is transforming at a fast clip. “Customer experience transformation and hyper-personalisation are trends that have emerged over the last few years and will continue to accelerate,” he said. “For instance, you can improve customer experiences by making it easy to access account information, maybe offer Alexa to check account balances with voice authentication or biometric authentication instead of having to remember a four- or six-digit pin.”

He added that “as for personalisation, banks are gathering copious amounts of data, and they are going to provide better experiences to their customers. They are going to offer multiple avenues of communication - which the customers prefer - and they will do sentiment analysis and even upsell or cross-sell products that are very specific to a particular customer’s needs.”

Dhananjaya concluded: “As we all know now, data is the new oil. Organisations these days are generating more and more data, and using that data to improve their offerings. We are going to see data and AI/ML taking on a much bigger role going forward, be it in the front office functions improving how you interact with customers, or in the back office improving operational efficiency.”

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