Portfolio+ recently published a Case Study with Fairstone Bank of Canada and their success in by using our GIC or term deposit solution to raise funds by offering deposits. This solution and the ease with which deposit orders are accepted and confirmed empowered them to grow their product offering. Pat Casullo, a Senior Sales Account Manager at Portfolio+ recently had the opportunity to speak with Graham Casselman from Fairstone Bank. Today’s episode expands on the case study and dives deeper into some of the topics. I’m excited that we were able to capture and share this discussion with you today. And with that, I am going to hand it over to Pat and Graham.

Pat Casullo:

Hello, my name is Pat Casullo and I’m a Senior Sales Account Manager at Portfolio+, and I’d like to welcome everyone to today’s podcast. Today’s episode continues our discussions around term deposits. And we’re excited to be joined by Graham Casselman of Fairstone Bank of Canada. Fairstone Bank of Canada and its subsidiary, Fairstone Financial Inc, form a leading Canadian consumer-lending group offering a wide range of lending products online and at their 240 branches coast to coast. We recently published a case study about our relationship with Fairstone Bank and their astounding success and growth using our term deposit management solution. Now, I’ve given a brief overview about Fairstone Bank, but the audience would love to hear more about you, Graham, and your background in the financial industry. And also, over the years, your organization has changed names and rebranded a few times, so it would be nice to hear about the history of how you became Fairstone Bank of Canada.

Graham Casselman:

Okay. Thanks, Pat. Yes, I myself have been in the financial services industry for about 20 years at various institutions, a few of them leading Canadian financial institutions, and in various roles, some of which have involved raising cash to fund our business, which is what my role is now at Fairstone Bank. About Fairstone Bank, many not know, but they were originally, or when I started, they were originally Walmart Bank or I had started just after Walmart had sold Walmart Bank to some private investors and renamed them Duo Bank. Walmart had established a bank in-house to finance its MasterCard business. And when they sold the bank to become Duo Bank, they still maintained that mandate. But as Duo Bank being independent, they wanted to branch out into other areas of the banking business. And of course to do that, they needed to raise funds. And being a bank, they were able to issue deposits. Shortly after becoming Duo Bank, they actually acquired, as you mentioned, acquired Fairstone Financial. This was announced early 2020. And once it passed a few regulatory hurdles, it rebranded itself as Fairstone Bank of Canada, which now includes both entities, the former Duo Bank, which as I said, was in the business of financing Walmart’s MasterCard and Fairstone Financial’s primary business was consumer lending. So that’s where we are today.

Pat Casullo:

Perfect. Thanks, Graham. Thanks for that history. And Fairstone Bank of Canada has been a valued client and partner of Portfolio+ for several years now. Would you mind sharing with our audience Fairstone Bank of Canada’s business strategy that Portfolio+ was able to collaborate with you on?

Graham Casselman:

Okay, sure. When Duo Bank became independent of Walmart, we needed to find some other sources of funding. So there were a few, and one of course, which was going to be deposits, given that we were a bank unable to take deposits. In the potential areas of the deposit business we looked at, the one that made the most sense to us was the broker deposit business for a few reasons. One of them of course being the very low overhead costs involved, and another being that it gave us the ability to raise a lot of funds in a short period of time. And it also gave us the ability to exit the business if needed. When we decided to go that route, we selected Portfolio+ as our vendor for term deposits for a number of reasons. Portfolio+ was very experienced in the industry, as well as they were well-integrated with the CANNEX system, which is the financial intermediary system that we use. As well as Portfolio+ was very up to speed on a lot of the CDIC requirements, which is very helpful to us. And of course, we have to adhere to those, and the requirements are changing all the time with respect to data and operational issues and matters like that.

Pat Casullo:

Perfect. Thanks, Graham. And now that you’ve been involved in the term deposit business for a number of years now, can you share or tell us about the amazing growth that Fairstone Bank of Canada has experienced using the term deposit solution? Perhaps, maybe starting from your early days entering the market to where you are at current state today?

Graham Casselmam:

Absolutely. When we entered the broker deposit business, this would’ve been in September of 2019, we got off to a very good start. We onboarded our first broker then and onboarded another one shortly thereafter. And by the end of 2019, we actually had raised a few hundred million dollars in assets. And we started off 2020 strong as well, but then things kind of tapered a little bit when COVID hit, just because our need for funds kind of waned is a lot of other institutions did as well. Really didn’t really significantly pick things up I would say till about a year ago, when the economic effects of COVID had passed and we had a now need to raise more funds. So we’ve been going very strong for, I would say the last year. To the point now where we’ve got well over $2 billion in deposits and we, of course have plans to continue to grow that business.

Pat Casullo:

Wow, that definitely is some amazing growth. Given, I think you said it’s about three years, three and half years?

Graham Casselman:

Yes, about three and a half years.

Pat Casullo:

Wow, amazing. And then in terms of just impacts, are you able to share some of those positive impacts that you’ve seen internally to the overall operations managing the portfolio? Any efficiencies you’re experiencing as that portfolio continues to grow?

Graham Casselman:

Yes, I mean it’s hard to really compare to anything because we did kind of start this business from scratch, but I can say the duties, at least at the front office to raise the deposits are shared amongst a few people. But if you combined everyone’s efforts, I would say it doesn’t even reach one FTE. So there’re certainly a lot of efficiencies being in this business, and given the amount of money we’re able to raise in the time we’re able to raise it and the staff that’s required to manage it. So certainly it is, in that respect, very efficient. And certainly, the Portfolio+ module meets all our needs in that respect. So we’re able to run things on a very, very low budget. And as we’ve grown, of course as our deposit base has grown, really our administrative matters and overhead costs haven’t. So yes, as we continue to grow, the efficiencies will only increase.

Pat Casullo:

Oh, perfect. Thanks, Graham. And then what advice would you like to provide the listeners based on your own experience if they’re considering pursuing the nominee deposit through that broker channel? Anything that you can share for those listeners based on, again, your experience?

Graham Casselman:

I think the key thing is to develop the appropriate business partners early on. Your vendor, Portfolio+, as well as establish relationships with not only CANNEX and CDIC, but also, and probably most importantly with the brokers. Because ultimately, if you are entering that business, they’re the ones who are selling your deposits. And the more broker boards you can get on, the more cash you’ll be able to raise in a given amount of time. So certainly, that’s very key. And selling yourself to the brokers, you certainly have to make the case that you have these efficiencies and you are able to serve the brokers well because when their clients hold your deposits, I mean there are some servicing requirements and there is an expectation on the broker’s part you’ll be able to deliver in an efficient manner to meet their clients’ needs. So certainly, I would establish those relationships well before your actually targeted go-live date, absolutely.

Pat Casullo:

Yes, perfect. So what I’m hearing is one of the key things there is to build those relationships with those brokers, have that strong relationship, so again, that they’re going to be funneling that business into your institution?

Graham Casselman:

For sure.

Pat Casullo:

Perfect. So based on the current economic state, we’ve definitely seen the popularity of term deposits skyrocket, obviously fueled by the higher interest rates. Do you see this trend continuing and why do you think term deposits are such a popular investment right now?

Graham Casselman:

Well, a couple of reasons. I think of course, safety is one of them. And as you mentioned, the higher rates has lured people into the deposit business. I would say we really didn’t see a big uptick in the business until a little after the start of COVID, maybe even not until early 2022. 2022 was a real bang year for the deposit business. It has declined maybe a little bit this year, but still very strong compared to pre-2022. And I would certainly see it staying at that levels or maybe growing slightly in the near future, just given things like demographics and given some uncertainties in the overall economy right now. If the economy does slow down, which many economists are predicting, and that’s usually good for the deposit businesses as investors look for safety. And a lot of investors, of course do their investing through a brokers, who offer the broker deposit. So I would certainly say there’s certainly opportunity for growth in the near and medium term. Beyond that, it’s really hard to say. A lot of external factors will influence that. Of course, the economy and what happens with rates in a few years from now, who knows? So when rates are lower, it seems people, as you would expect, lock in for less time. And that’s usually maybe better for short-term investments like savings accounts. And it’s when the rates are higher that you’d see more flight to the term deposit. So I would say going forward in a few years from now would be a little hard to predict. But certainly, in the near term I would say it’s a good business to be in and it’s a good way for institutions to raise needed funds and in a efficient way and in a short period of time.

Pat Casullo:

For sure. So is it fair to say that in the foreseeable future, you still see term deposits being a portion, percentage-wise, of investor’s total portfolio?

Graham Casselman:

Oh, for sure. I mean, it’s a very secure investment, particularly if you’re within your insurance coverage limits. And it’s certainly something that most investors understand well. So yes, I would certainly say as a fixed-income investment, it would continue to be very popular among investors. There’s always going to be a demand for it. Some of the big upticks you’ve seen it in certain times, I mean that’s a little bit variable, but overall, I absolutely would see term deposits being in high demand. Another reason, as I mentioned, that the demographics is you’ve got a lot of people who are retirement age now, who are generally looking to park their money in more safe vehicles, and certainly term deposits, if they’re within their coverage limits are an obvious choice for a lot of people.

Pat Casullo:

So Graham, do you see any opportunities for innovation in the term deposit space for financial institutions?

Graham Casselman:

There has been a lot of innovations over the last couple of years. CDIC had brought in some new data requirements, which required systems upgrades and some innovations came out of that. Certainly, there is some room for more. I know for example, a lot of clients may transfer their GIC from one broker to another. That’s still a very, very manual process. And as your book grows, the number of requests for that are only going to grow as well. I know I was at a conference last year and they were looking at developing such a industry-wide system to accommodate that, but certainly if they could do that, that would certainly eliminate one of the very manual processes that still exists. But certainly in the time that we’ve been in the last three and a half years, certainly we’ve come a long way in seeing some of the processes go from being highly manual to being almost completely automated.

Pat Casullo:

Perfect. That’s great. Graham, and just one final question to wrap up the podcast. Graham, are there any final insights or best practices you’d like to share with the listeners today?

Graham Casselman:

Yes, a few things. As I had mentioned before, once your relationship with a brokerage is established, it’s very important maintain that strong relationship so that you’ll continue to get their business or they’ll continue to drive business your way. Another thing of course, I would say is make sure that you’re really up-to-date on a lot of the systems requirements, because that’s really a key aspect of this business, given how much of it is automated compared to say a regular non-broker deposit business. So I would say keeping state-of-the-art technology is certainly a best practice as well. And I think another thing is just staying abreast of all that’s happening in the industry. Doesn’t seem like too much had happened until maybe a few years ago, but in the last few years, a lot has changed and I think there’s certainly going to be more changes in the near future. So I think being ahead of the curve there is key for anyone who wants to be in this business and use this business as a major funding source.

Pat Casullo:

That’s great. Thanks, Graham. So thanks again, Graham, for joining us today. Certainly learned a lot and it was pleasure speaking with you today. And again, thank you for your time today.

Graham Casselman:

You’re welcome. My pleasure.

Dianne Cupples:

That was a wonderful conversation, building upon the information shared in the Case Study. I really appreciate Pat and Graham for taking the time out of their busy schedules to share their thoughts with our listeners. If you’d like to learn more about the Fairstone Bank of Canada story and haven’t already read the case study, please check it out on our website at portfolioplus.com. For more information on how you can implement a GIC solution in your organization, please reach out to Portfolio+ through our website. I hope you enjoyed our podcast today and appreciate you spending your time with us. If you’d like to learn more about Portoflio+, or have any feedback, you can reach us through our website or follow us on LinkedIn or Twitter at portfolioplus19. You can subscribe to our podcasts wherever you listen to your podcasts or through our YouTube channel. Until next time, all the best.

Bruce Duthie:

Thank you very much, Dianne, and it is truly my pleasure to join you on this platform and share some thoughts and insights and hopefully have a great conversation about some really emerging and important areas within the financial services domain. I think you’ve captured our history well, and our future will l probably get into the conversation. So maybe just a little on my personal background. I did join Peoples back in late 2018, and since then, we’ve been on an exciting journey of adopting and investing in core technology platforms to expand our capabilities, both internally and externally, so we can better service our customers and clients in more efficient and effective ways. So this is an exciting juncture in our journey, and we look forward to continued success along this pathway.

Dianne Cupples:

That’s great. That’s great. Well, I am very excited for the conversation. You and I have talked many times throughout the years, and I thought today, a great way to start the conversation would be based on a recent discussion that you and I had. We were talking about how banking has changed. So gone are the days of having to go to the bank to perform every type of financial transactions, from accessing cash, paying bills, applying for mortgages. By leveraging technology, banking has advanced at a really fast pace. I remember when the skepticism was around of using your phone to do banking, but now it’s expected and a digital channel for everybody to have access to be able to perform banking transactions. So the bankers of today really need to be technologists, or at least comfortable with technology, or have knowledgeable technologists as part of their team. So the corporate culture, I would think, in the banks and financial services space is really changing as a result of that shift. So I know Peoples have gone through quite a bit of cultural change, and I was wondering if you could share some of your thoughts on what you’re seeing taking place from a cultural shift in the world of banking.

Bruce Duthie:

Absolutely. Dianne, I think you’ve hit it on the head as it relates to the kind of starting point in the impetus for real transformative change. Whether it be technological, whether it be strategic, whether it be economically-driven change, it all starts with culture. And at Peoples, we put people and culture at the heart of our strategic planning. And let me just kind of unpack that a little bit, because in general, the topic of people can be interpreted in very different ways. So when we look at people strategically, we kind of look at two dimensions of a person, and that’s the core kind of competency, and capabilities, and skillsets that they bring, and equally important is the character that they bring to the equation each and every day. Are they open-minded? Do they operate with integrity? Do they have discipline? Do they have a personality that connects well with others in team situations, in stressful situations? So it’s that balance between competency, capability, and character that really drives the essence of the formation of a sound culture. Once that cultural fabric is put in place, then it’s up to the people to honor that and live by that day-in-day, whether it’s pushing the envelope as it relates to new markets, new developments, new products, investments in technology, or simply how do we have conversations in productive fashions around interesting and important areas. So that cultural foundation allows an organization to tackle and confront new situations with the courage and the commitment to actually bring it from an idea all the way to fruition. Thinking about your point around the integration of, call it the social expectations, and the emerging expectations of financial institutions, whether it be banks, or non-banks, or anybody that plays in that ecosystem, you’re absolutely correct in saying that banking is no longer, and this has been an idea that’s been discussed for several years now. Banking is no longer somewhere where you go. It is something that you do that’s integrated into your life, and how individuals bank is different. How people bank is different because by definition, their lives are different. So when you look at being in this space servicing people, taking a tailored way and having an adaptable way to develop products and solutions that truly meet their personal needs is at the forefront of our strategic thinking, because otherwise, you just become a commodity. You just offer a different type of product, a different type of service under a different banner. What we’re trying to do is build an experience that’s unique, that is truly tailored to the needs of our customers.

Dianne Cupples:

And I think that’s a great lead in to where I’d like us to explore a little bit more, because we’re hearing terms in the industry like embedded finance, frictionless banking, and it all is building from that open banking, open finance terminology that gets floated around on a regular basis. And you used the term of it just being part of our lives, being there. Last year, I actually moderated a panel with Open Banking Expo, and in that panel, we focused the discussion around banking, and electricity, and comparing the two. So as a society, we understand, or I should say we expect, that when we turn on a light, we flick a switch, a light turns on. We expect the systems are in place that are work, that are dependable. They’re safe and based on everything that’s being provided, we can use them. We don’t think about the infrastructure behind it when we touch that switch. We expect it. When we think of terms like open finance, embedded finance, we are thinking about banking in a way to access money or payments. It’s very similar. It’s part of my life. It’s available to me where, when, and how I need it. I don’t really think about the infrastructure that’s required to deliver it. I think all we care about is having access to the financial systems that are easy to use. They’re safe. They’re secure, and they focus on creating that financial well-being for consumers in today’s world. So you’ve kind of started to touch on that, so maybe can you share your views on how open finance, or open banking, whichever term, or embedded finance, whichever term you’re comfortable with, can you share your views on how you think that will increase access to financial systems and products? Because you’re tying it now to culture and culture being creative, and offering new products, and being accountable to bring it forward. Well, what does that enable for you to bring forward from the financial systems and access to products? And if open banking and open finance, once it becomes more commonplace across Canada, what opportunities do you see for Peoples then to bring new products and services to your customers?

Bruce Duthie:

Yeah, that’s a very relevant topic, Dianne, in this current industry because a lot of definitions, a lot of new terms, are coming to the forefront on the headlines, and the papers, and the websites. And it’s very important that we adopt a common understanding of what exactly these emerging technologies mean. And I’ll start by answering your question by just thinking about the fundamentals of banking first, and then I’ll move into how that construct is actually preserved, well preserved, but just being manifested in a different fashion through the constructs of open banking and open finance, which are different. And I’ll highlight on the key distinctions between the two. Starting with banking as a core and mentioned this in your earlier statements, is that it really involves three fundamental aspects. One is to have a mechanism for retaining a store of value. The second is offering some form of a credit solution, and then the third is the ability and capabilities to move money. Now each one of those, if you like, dimensions of the banking construct, storing, credit, and movement of money, then expand in kind of multi-dimensional ways as you look at industries it serves, the people that it serves, the purpose it serves for economics and society. And then when the aspect of an open banking concept enters into this fold, it takes barriers down between existing financial institutions, meaning that the data that’s stored in one bank now becomes open to other banks to share and use. Which has inherent benefits to consumers because their data isn’t only protected and utilized by a single entity, but the consumer has more power and influence on their utilization within the financial services ecosystem. Open finance takes that construct and expands it into new industries. So for example, your financial data, your financial capabilities for integrating between industries like, call it banking and healthcare, like banking and education, banking and “X” industry. It starts to build a lattice framework between banking and other industries, which you can imagine truly embraces this notion that banking is part of our lives. It’s not a place that you go, and it should be found and embedded into these various constructs within our lives, regardless of which industry. So I think there’s a lot of potential associated with that thinking. Now with that said, and we can appreciate this, there’s regulatory constraints. There’s data privacy, there’s personal information, data ownership. There are an abundance of constructs and regulatory requirements that must be thought of very carefully before these floodgates start to open. The potential is huge. The risks are also noteworthy because it becomes a new way effectively on how people and organizations function in society. At Peoples, we are definitely investing into technology capabilities that would give us the potential to operate in such an environment. Now, without getting into the details, I think we can appreciate that foundation architecture can be built rigid, or can be built in ways that are flexible and adaptable. We’re taking the notion of taking these models into more of an adaptive culture going forward.

Dianne Cupples:

So it’s going to open up more opportunity for banking to, to your point, not be something that we do, but part of our whole lives. So as part of our whole lives, I see that we’ve always talked we need financial planners and various other things. We need to have a plan for ourselves individually as a consumer. I think there’s another aspect that doesn’t always get talked about, and I’d be interested in your thoughts on that too, is from a small business and commercial side. So I see opportunity for it to have our small businesses make better informed decisions, because from what I’m hearing you say is it becomes part of their lives and enables them access to everything. So instead of waiting to close their books five days after a month ends, they could push a button at any point in time and have a complete picture of their financial services. There’s an opportunity for them potentially to test market products and see the results of that market uptake really quickly by being able, again, to have access real-time to all the financial data, the transactions, and the sales. So if we focus on it from a small business point of view, do you see that that will help us better improve the economy from enabling small businesses to be more successful, quicker, or faster, or just more informed?

Bruce Duthie:

Yes, small businesses are truly at the heart of many aspects of a strong economy, and being able to provide sound, secure, reliable, efficient, scalable, simple solutions for our small businesses out there provides an opportunity for these organizations to have strong working capital, to have capabilities for investing into the growth and the protection of their business from a sustainability standpoint. And having the banking backbone services available to small businesses in such a way that makes it seamless almost, and also protects them for the current and future economic conditions, is a very important aspect for financial institutions to architect these solutions for our small businesses. Each small business, as you can imagine, has an ownership behind it, so that ownership represents the individual banking needs. So you can see the natural opportunities and synergies between providing very sound banking services for small businesses cascades into the opportunities for providing personal banking services for the ownership group.

Dianne Cupples:

That’s great. I think you’ve expressed the synergies that I see from both sides, for movement for both, to your point, small businesses as well as consumers. I think there’s great opportunity there as we continue to leverage technology. One of the things that you briefly mentioned on is regulatory change and data privacy, and I know that open banking has progressed in other regions across the world more quickly than some would feel that it is moving in Canada. There’s concerns being voiced that we are behind and that we need more focus and momentum behind it. So one of the questions that’s being asked is, should open banking be mandated or regulated to enable faster adoption across the financial services space? Now, in your role as a Chief Risk Officer, you’re well aware of impacts regulatory change can have on financial institutions, both from a reporting but also from a technology point of view. So given all the benefits that we’ve highlighted and talked about, is regulation a way to increase momentum, or is it really about educating consumers and small businesses so they can put more pressure on our government to move quickly? I’d be very interested in your thoughts.

Bruce Duthie:

Yeah, that’s a great question, Dianne. And I think it’s absolutely, there’s a balance between the importance of regulatory movement on this space. Equally, the importance of people, and consumers, and general society to have a strong understanding of what this opportunity means to them personally, either as a company, as a family, or as an individual. We have and continue to have excellent relationships with our regulators. We value their contribution to what we do from a value protection standpoint, and we would work with our regulators to create that balance between adoption, opportunity, and capabilities to open this framework up to our customers, and I think broader society. The interesting aspect of this is you can go too far or not far enough, so it really is striking that balance between the right degree of regulatory involvement and the adoption rate for consumers. I think playing that middle-of-the-lane road in this situation would be the best opportunity for a healthy outcome for all stakeholders.

Dianne Cupples:

That’s great. I think there is, to your point, a balanced approach that we could take to this. What that is, I don’t know, but I think it’s important, as you said, that everybody come together and work together to resolve what is needed and collaborate on the outcomes so that we can get the momentum going just because of the value that it will give to consumers and small businesses. Especially as we are going into challenging times with different inflation rates and various challenges that we’re seeing in today’s economy, the more we can empower and enable people to manage their finances, the better off we will be as a country, I believe.

Bruce Duthie:

Yeah, well said, and I agree with that.

Dianne Cupples:

So one of the other aspects of this, we’ve talked about leveraging changes in technology and the marketplace as things continue to evolve, and part of that means bringing and working with partners. I know from a Portfolio+ point of view, we always look to bring partners to the table that we can work with, both from a customer, and other fintechs, or other technology partners in this space. We all have to work together. We have to have very close relationships, in my mind, I feel, in order for everybody to be successful. And Peoples and Portfolio+ have been working together for many years now, and at Portfolio+, our approach to our customers has always been to work with them as partners focused on a joint success. So if you and your customers are successful, then we at Portfolio+, we’ve done our job to support you. And so as things continue to change with such a fast pace that’s happening, what would you recommend? Because we’ve had a great long working relationship together, what would you recommend that Portfolio+ continue to do to support our customers moving forward?

Bruce Duthie:

Yes, we have. We’ve had a long and successful partnership, Dianne. And I think that’s important to highlight because when we’re competing in this space, and when you’re trying to make a difference in this space, taking a protectionist view that it must be built here, I think is very limited. We look at our partner ecosystem as an extension of our core value proposition, so really finding the right partners that align both culturally, strategically, and technologically is a key differentiator that we continue to invest in. As it relates to how, I’ll call it technology companies evolve, and I’ll start with that deliberately because I think it’s the importance for technology companies to recognize that they are evolving just like the rest of society’s evolving. So limiting yourself to being categorized as strictly a technology company, I think is a thing of the past. It’s looking at the services, and the capabilities, and the value proposition that an organization is bringing to society needs to be factored into the overall strategic roadmap. What does this mean? Well, it means looking at the solutions, and products, and capabilities that can be adopted by organizations and by individuals that actually make a meaningful difference in their day-to-day lives. This is not an easy problem to solve. Cranking out commodity-type banking products and services, I think is no longer sufficient to meet the expectations of the emerging expectations of people, the emergence of new types and shapes of risks that we’re getting into, the new types of competitive expectations that are being put upon us by various other actors in the ecosystem. Therefore, our business models of the past of saying we’re just a technology company, and we just make products, or we’re just a bank, and we just develop product and services, is going to be a thing of the past. So what does that mean? Looking at the utilization of data, looking at the multiple sources of data that’s available, and using that to harness clearer insights into this future world that we’re getting into is very important. So we have an ability to adapt to these circumstances more strategically through analytics. The investment in people, culture, and competencies, to embrace the setting, the right tone from leadership is so important in this, meaning that leaders aren’t just there to set the agenda and walk away, but they’re part of the equation to drive the organization to that next level, to establish trust, to build a framework of integrity, to walk the talk, to recognize the importance of inclusion, diversity, in multiple aspects of what this future world looks like. That is the future of leadership, and if organizations do not embrace that, in my opinion, it doesn’t matter what industry they’re in, they’re not going to survive. So constant and rapid evolution on those aspects outside of just the core competencies are equally important, and therefore, leveraging that partnership network and having that same construct for thinking about the future is very important.

Dianne Cupples:

That’s great, and I do believe a lot comes from the leadership, the example that that leaders set, and I fully support the inclusion and diversity. I think coming together with your culture, for example, as well as your partner’s culture, you can actually achieve greater things when you do come together, and you’re all into what it is that you’re trying to achieve and what the outputs actually are.

Bruce Duthie:

That’s exactly it, Dianne. And if I was to hone in a little bit more on the technological expectations that I think people, organizations, and partnerships are seeing, is a pattern of three, I’d call it, time-constrained requirements. And these are the three items that I would want to highlight. One is the capabilities for technology to be simple and easy to interact with. Two is the depth and breadth and scope of information that’s within the ecosystem that can be transformed into integration and intelligent purposes. Insights need to be derived from this data, need to be derived from this information, need to be accessible so organizations and people can make sound decisions. And whether this is a decision made by a person, or decision made by a machine, it doesn’t really matter, but sound decision making is fundamental to the future, which also supports the strategic and risk management objectives. And the third layer, and this is where it gets really exciting, is the advances that technology are making on the computational aspect. The speed and the volume of data that can be processed in mere nanoseconds is radically different even from where it was five years ago. So this abundance of computational power will unlock and unleash new capabilities that we’ve never seen before. So these aspects need to be really embedded into the technological planning for organizations, whether you be a pure tech company, or an organization that leverages technology. Embracing these three dimensions in conjunction with the cultural aspects, in conjunction with societal expectations, in conjunction with regulatory expectations, that creates this multidimensional construct that organizations must be equipped to deal with. If you strictly rely on a vertical and linear aspect to this thinking, I question the sustainability of that type of thinking in today’s world.

Dianne Cupples:

I like the way you’ve outlined those three items because it does speak to really the next stages of where things are going. If we have access to huge amounts of transaction data and processing data as we’ve talked about, by looking at that data, everybody can make better and more informed decisions. So product we’re producing, services people are providing are more efficient. They’re more informed, and you can actually be more successful by making those data-driven decisions. That was mouthful for some reason.

Bruce Duthie:

And that’s exactly it, and one of the things that gets me very tuned into the conversation is when organizations are sitting around the table and saying, “We need more data.” And I question that, do we need more data? We have so much data. So much data, more than they can probably wrap their heads around. So it’s the utilization and the datafication of everything that is out there and translating that into information and insights that can be leveraged into real time decision making, strategic planning, risk mitigation, risk management. This aspect of truly transforming an organization from a linear mode of thinking to a non-linear mode of thinking, which is far more aligned with how life operates.

Dianne Cupples:

And the way you’ve described it, I know some people think of machine learning as potentially impacting other people’s, I’ll say jobs loosely. But the way I’m hearing you describe it is it’s to augment, it’s to enhance, it’s to improve. It’s not something we should see as a threat.

Bruce Duthie:

Yeah, that’s exactly it, Dianne, and I think I’ve been around long enough to remember the fear that the introduction of email, and the introduction of ERP systems, and the introduction of workflow engines and databases was going to result in a massive loss of jobs and abundance of spare time for people. Now, I think what technology does when embraced properly… And I haven’t seen any of those by the way. I’ve seen more time being utilized more efficiently, but not necessarily an abundance of spare time. So the aspect of the adoption and the utilization of capabilities, like machine learning, as a tool set as opposed to a competing force, again, goes back to the mindset and the cultural adaptation required for organizations to have a sustainable future. So open-minded to these types of capabilities is, I think, very important for organizations to not overlook.

Dianne Cupples:

And I think that the conversation today has been great. While it all started talking about banking, it actually has applications across many different verticals, not just the financial services space. I think that’s an amazing statement to connect it all together with what you’ve just said. It’s not just any one vertical or another. This can be applied across multiple verticals to help everybody be more successful.

Bruce Duthie:

That’s what we believe, is that we have a higher probability of competing if we have that open thinking, as opposed to pretending that historical artifacts and historical scenarios are going to just manifest again in the future. I think we’re looking at the future from the emergence of this new construct of integration as a way that we have to adapt and be prepared for opportunities and risks that we haven’t seen before.

Dianne Cupples:

That’s great. Well, Bruce, I really appreciate you taking time out of your busy schedule to speak with me today. I’m sure our audience has been able to take away something from this conversation. I appreciate you sharing all your thoughts and giving some insights to our listeners on Peoples and yourself. Did you have any last pieces of information based on our discussion that you’d like to share before we wrap up for that?

Bruce Duthie:

It’s been my pleasure, Diane, always a pleasure to connect with you. And thank you for the continued support, and I don’t have anything further to add. I think it’s been a great conversation. I’ve enjoyed your perspectives and sure hope the audience has taken a few nuggets away as well.

Dianne Cupples: 

Great. Thanks, Bruce. Thank you for listening to our conversation with Bruce Duthie from Peoples Group. For more information, please visit our website PortfolioPlus.com/podcast. If you have any feedback, you can reach us or follow us on LinkedIn or Twitter @PortfolioPlus19. You can subscribe to our podcast series wherever you listen to your podcast. You can also add yourself to our mailing list, and we will notify you when our next podcast is available. Until next time, all the best.

Kim Muise:

Thank you for having me and hosting this podcast. Pleased to be here.

Lesley Lawrence:

Great. So I’ve given a brief overview of CANNEX, but I’m sure the listeners today would be very interested to hear a little bit more about your organization and your background in the financial services industry.

Kim Muise:

Certainly. CANNEX is an independent and privately-held company with operations in both Canada and the U.S. My focus is our Canadian business and I’ve been with CANNEX for six years; a little more than that. My career has always been in the financial services space. It’s just the products that have changed from time to time and over the years. I started out in the insurance business as an actuarial student. After leaving that discipline, I focused on product management, starting with retail banking services, followed by full service and discount brokerage services at a large Canadian bank. Then I spent eleven years at TMX Group managing a wide variety of market data products and services. In 2016, I found my way to CANNEX. The CANNEX Financial Network, which as you mentioned, facilitates GIC transaction processing is my primary focal point among the Canadian services that CANNEX offers. In fact, the CANNEX Financial Network will celebrate thirty years of operation in 2023 next year.

Lesley Lawrence:

Wow, congratulations. That’s quite an accomplishment for the organization to be celebrating thirty years. With your history and your background, you certainly, have extensive knowledge of the financial services industry and I learned something new about you today. I didn’t know you were an actuarial student at one point in time.

Kim Muise: 

Yes.

Lesley Lawrence: 

That’s pretty cool. So let’s dive in a little bit around the current economic landscape. We know that there’s talks of recession, some economists say bigger recession, some say smaller recession; term deposit rates are on the rise. We’re seeing that for sure, and my understanding is currently it’s probably one of the best term deposit selling environments we’ve seen in a while. Maybe you could share a little bit about your perspective in your role at CANNEX and what you’re seeing around this.

Kim Muise:

Definitely. Well, as you said, interest rates are on the rise. The Bank of Canada started raising the interest rate with some vigor early this year, and with that, the term deposit or GIC sales have taken off. It really is, I think, a bit of a perfect storm right now for term deposits. Certainly, the interest rates rising, the volatile equity markets, and a baby boomer generation that is either retired or near retirement and they’re looking for income and they’re looking for low or no risk options for their investments. So that’s a little bit of a perfect storm for the numbers we’re seeing right now. We’ve processed our highest number of nominee GIC orders ever to date this year. Over 1.2 million orders processed with a total value of over $80 billion and the year’s not done yet. So we’re expecting quite the record year. We still have, as of our recording today, two more Bank of Canada rate announcement dates coming up, one next week on October 26th, and then again on December 7th. So the predictions are not mine, but the general consensus or predictions out there are that the Bank of Canada will raise the interest rate to 4% by the end of the year. And on that basis alone, even equity markets aside, I truly expect a strong continuation of the term deposit sales well into the New Year as well.

Lesley Lawrence:

Wow. Yes, I guess these days you don’t need a crystal ball to interpret the fact that there’s likely going to be interest rate increases and hence the volume for that is still going to grow. So let’s talk… You shared a little bit about volume there, so maybe share with us how many financial institutions are moving applications through the CANNEX network and maybe share with us kind of… You shared a little bit of volume, but in terms of on a monthly basis, volume of application funds, bit of get a perspective on that.

Kim Muise:

Sure, sure. So we’ve kind of look at it from both sides. We have our nominee dealers on our platform, and we have the issuers of the GICs or term deposits. So currently we have about thirty nominee dealers on our network, and I say about thirty because there’s a number of them or a handful of them that have both IIROC ( Investment Industry Regulatory Organization of Canada) and MFDA (Mutual Fund Dealers Association of Canada) arms that are submitting order flow for these transactions. There’s also a number of carrying brokers on our network as well. On the issuer side, we have about forty participants, and again, the about 40. So there’s many issuers on our network that will issue the GICs or book those GICs from multiple sort of legal entities. So a particular issuer might have a bank and a trust arm, or they might have… Even you’ll see with some of the larger banks, they might have four or five issuing entities. They do this to optimize the sales of the term deposits and the insurance coverage, the deposit insurance coverage. As for order flow, in the past five years or so, CANNEX would probably see between 50,000 to 60,000 orders processed by the network per month with a value from three to five billion dollars. And just to give a little perspective of what’s been happening this year, we are seeing about 130,000 orders per month on average with a value of eight to ten billion dollars.

Lesley Lawrence:

So you’ve doubled your business, right? Based on those monthly stats, you’ve doubled your business. If I was a financial institution that was interested in joining your network, would I need to worry that you have a capacity limit of a certain level? I mean, I know you’ve doubled already, but how much more can you take on? Is there a limit? The reliability of the service? I guess maybe share a little bit about your perspective on that.

Kim Muise:

Well, we have a robust IT presence, and we are always paying attention to that. So the throughput really is not an issue there. We’ve had no hiccups processing the amount that we’ve processed, and certainly, a doubling in volume this year has not presented any challenges. We keep our eye on that one.

Lesley Lawrence:

Okay. So good to know that there’s no caps, there’s no limits, in terms of the volume of business, and you’re certainly open for business to take on new opportunities and work with new financial institutions, which is great to hear.

Kim Muise:

Absolutely.

Lesley Lawrence:

So just taking it back a couple of steps, why would a financial institution really want to start selling term deposits? Is there an evolution to this channel in terms of products that a Financial Institurion might bring on board? But maybe just kind of walk through a little bit what you see and what you’ve seen through your time at CANNEX in this regard.

Kim Muise:

Certainly. Well, probably an executive, one of the Financial Institutions would best answer this question, but I’ll share what I’ve heard from clients over the years and prospective clients that have come along. For example, there’s some Financial Institutions that start out in the lending and financing business, and they may borrow from third parties to fund this lending. Then at some point, it’s probably a commercial or business strategic direction where it makes sense to raise their own deposits or create their own funding. So they could acquire a bank, they could start the process of launching their own bank right from square one. It’s a timely process, but I’m aware of some that have done that, definitely. Once a financial institution is in the business of selling term deposits, they may want to evolve how they sell or where they sell these products. And traditionally, a Financial Institution would have sold term deposits probably they start out directly to the client. Generally, from a bricks-and-mortar presence, a branch.

Lesley Lawrence:

Yes. Yes.

Kim Muise:

A branch network. And really outside of the large or the big banks here in Canada, many Financial Institutions don’t have that extensive of a branch presence or network. So some will move on to yet another channel. They’ll look at selling directly to clients, but maybe through an online presence. And what an online presence will do for them is it goes beyond their geographic sort of limits of their branch reach. And so that exposes them to national distribution of their product across Canada. Now, yet, another way for an FI to diversify or increase their source of funding is by accessing the nominee channel. And this is basically selling their products via the dealers. So the dealers’ advisors would sell those products. This is where CANNEX comes into the picture; this is our sweet spot. Our network facilitates the term deposit order processing between these counterparties or third parties, the issuers of the product, and the dealers whose advisors sell those products.

Lesley Lawrence:

So it’s quite a journey, I guess you could say because you took it right back to original branches, bricks and mortar, somebody having a term deposit, putting their money into the institution and the institution then using that as their capital, whereas your network really opens up a whole broader base of opportunity to fund growth for financial institutions, which is the way I would interpret that, very interesting. And in terms of your clients, Kim, you’ve got clients that… Financial institutions of many different sizes, right? Can you share with us who would be a good candidate for using your services based on what your current client base is and what you’ve seen in the past, what would a typical client look like? Any parameters around that?

Kim Muise:

Well, I’ll speak to this from both the sort of dealer view and the issuer side. And yeah, we have a variety of sizes of financial institutions… Of dealers from small, medium to large. It really comes down to what are they trying to achieve. Dealers that are a good fit for our services are those that… Well, particularly as they get into handling greater and greater volume of GIC purchases and transactions and so forth, when that starts increasing, sometimes if they’re administering this manually, it starts to get unwieldy pretty fast. And manual processing too is prone to errors and so forth. So if the dealer is seeking a more efficient process, a more automated process, definitely they will approach us. Another benefit, not only the automation, the efficiency, is when they come onto our platform, what we have is a number of issuers that are also processing in an automated fashion, but they’ll have access to those issuers that are selling their product in the nominee space. So by making connections with those issuers, those dealers may now offer to their advisors a greater breadth of product, of issuers and so forth. And that makes their advisors happy. And so they’ve got more diversity, more selection of term deposits from different issuers; small, medium and large. And sometimes that is interesting because they like to have different options, types of companies that will appeal to their advisors and their advisors clients. And sometimes even with the credit unions, oftentimes you may see superior rates on occasion, those that are a little more aggressive and are trying to raise a lot more funding may bolster their rates for time being. So this gives the dealers and their advisors better access to product. To look at the term deposit issuer side of it really we will see issuers approach us where one of their strategic goals is really to grow their funding base or diversify their funding channels too. This is important too because they don’t want to be too reliant on one particular distribution channel for where their products are sold. An example of this might be a small to medium-sized bank or credit union that is coming into or starting to utilize the nominee broker channel as a way of distributing their product or raising funds. And the great thing about this, I think I mentioned this earlier, is this opens them up to national distribution of their products. So if they are primarily located in Central Southwestern Ontario, that’s where their bricks and mortar are. They may have an online presence, but there’s still is some limitation by moving to the nominee broker channel for distribution of their product as they make these agreements, or with the counterparty dealers. I The dealers generally… Well, most dealers will have presence of advisors across Canada. So again, now they’re expanding their distribution of their product across Canada through the advisor network.

Lesley Lawrence:

So it sounds like that there’s a lot of variety and options, right? For your base of financial institution. In terms of size of, let’s say an organization assets under administration, what typically would be… Or again, just in general, would that look like for somebody to join your network for it to make sense for them to join?

Kim Muise:

Yeah, we have no limitations. It’s really what they’re looking to… We have no numbers. It’s really what they’re looking to achieve. So if they’re a much smaller institution, I’d say generally the fit is around probably a minimum… It’s just what I’ve seen, a minimum about two billion in assets under administration is usually kind of when they start looking at… If they have an aggressive growth plan, they’ll start looking at different ways to improve their funding.

Lesley Lawrence:

Okay. And I guess, as you said earlier, once you get to a certain size, you need to diversify. And so hence when you’re starting to get a portfolio in that space, you have to start looking at other options, so. Let’s talk a little bit about products and just get your perspective, because we’ve talked a lot about Canadian market. Are you getting which inquiry or demand, let’s say in foreign currency deposits? And if so, which foreign currency would that look like?

Kim Muise:

Okay, yeah, that’s a good question. We have the ability to process any GIC transaction, be it Canadian dollars, U.S. dollars, what have you. Really, I’d say I’ve only really seen a little more interest in this space since the CDIC (Canada Deposit Insurance Corporation) extended deposit insurance coverage to foreign currencies, to GICs issued in foreign currencies. And that happened on April 30th, 2020. So since that time, I’ve seen a few issuers, if they didn’t have a U.S. dollar GIC product to open that up or to enter that space. And I’ve seen definitely more transactions, but I wouldn’t see… Wouldn’t say it’s been a bit of a lightning boit; It’s been slow growth. But I think there’s probably a number of external factors that would influence that.

Lesley Lawrence:

Yeah. That’s just interesting to understand if there is any demand outside of the Canadian currency. So if we ask you another product-related question, when you look at your term deposit, is there certain terms of term deposits that… I’ll use the analogy of “flying off the shelf”, or are more popular amongst your client base than others?

Kim Muise:

Yeah, that’s an interesting question. So I would say, just kind of thinking back the last five years or so, definitely the outlier term is the one-year term. That’s typically been the most popular by a long shot. It definitely is this year as well. It’s the top sort of the most popular term deposit, but I’m also seeing a lot more volume in the two to five-year range as well.

Lesley Lawrence:

Yeah. I guess with the interest rates, again going up, people see return for longer. So that’s interesting just to kind of see where it’s shifting and where the demand is shifting to. So the last couple of years, our industry has seen a lot of regulatory changes and I know these have been really designed to help modernize and enhance the Canadian deposit insurance framework. It’s been a lot. I’m sure it’s been a lot from your perspective. I know in the financial institutions we work with, it’s been a lot. It’s been a lot for us. And I know you don’t have a crystal ball, I personally think we need a little bit of a stabilization period in this regard. But maybe share with us what’s your thoughts on this? Do you see more regulatory changes coming? If so, where do you believe… The same mindset as me that we need to take a breather? I mean, again, it’s been so impactful to the industry and all the players in it. I’m fascinated to kind of understand what your thoughts are on it.

Kim Muise:

Well, it’s been quite a ride that the last three years were consumed by a very notable and recent regulatory change in the term deposit space. And that was the CDIC Co-Owned and Trust Deposit Disclosure By-law. It’s a bit of a mouthful. It came into force on April 30th, 2022, and there was a lot of work prior to that. Its intended goal was to strengthen deposit insurance protection for the consumer. But as a consequence, actually, the significant changes that were required to achieve compliance actually had a sort of byproduct effect of modernization in the space and improved efficiency. So it was a good thing. Yeah. I mean, it’s a good thing for the consumer and it had good byproduct results of all the work that was done. So as far as what the future holds, I don’t know, but I would definitely agree we could all use a break. A little bit of a break.

Lesley Lawrence:

So it certainly sounds like it was a lot of work, but it paid off and we could do more. But yeah, we need to take a little bit of a step back and just absorb it all before we take the next step forward.

Kim Muise:

Yes.

Lesley Lawrence:

Yes. We know today’s podcast is about what’s possible in the term deposit space. So maybe from CANNEX’s perspective, are there opportunities for you guys to continue to make advancements in the term deposit space and what might that look like?

Kim Muise:

The term deposit space is definitely a candidate for further innovation and operational efficiencies. If I had to name a couple, I would say net settlement of funds for all the types of transactions; be it purchases, redemptions, maturities, interest payments, etc. Net settlement of funds is an area of opportunity. CANNEX can help with that, we don’t do fund settlement that happens outside of our network, but we certainly can help with the information passing and so forth to facilitate that. Another area is broker-to-broker transfers of term deposits. This is where a GIC moves in kind from one broker or dealer to another. That can happen for a number of reasons. It could be one dealer buying another. So they’ve got to move. An advisor may move from one dealer to another and take with them their book or their clients and their client’s holding. So that GIC needs to move from one dealer to another or just right at the client level. A client is moved from one dealer to another; changed advisors. And so they’ll take their portfolio with them to that new dealer or advisor. So that’s another reason for… The reason GIC needs to move. This happens all the time in the industry. It’s a very manual process today. It can certainly benefit from some automation and efficiency, but the challenge with some of these is they’re what I’ll call industry initiatives where you really do need the support of a critical mass of players in the industry to push this forward, get some traction, make it happen, or it can be a regulatory reform. That’s a great catalyst that I classify as the CDIC By-law, which the byproduct of all the efficiency, but whatever that catalyst may be, CANNEX is always looking to be part of the solution, either lead it or help in that solution. And we’re very focused on furthering industry automation where we can. It benefits everyone.

Lesley Lawrence:

Yeah. Well, and that makes sense because I said at the beginning you are the dominant player in this space, right? So you’re advocacy and you’re at the front of driving these initiatives forward for the benefit of the industry and your clients or your partners at the end of the day.

Kim Muise:

Absolutely.

Lesley Lawrence: 

So, Kim, we’re coming to near the end of our discussion today, and when our listeners walk away from this podcast, what’s the one thing or the one key takeaway you want them to remember about what we’ve talked about today?

Kim Muise:

I would say if you’re thinking about or you’re curious about growing your presence in the term deposit space as a dealer or issuer, new entrant, then don’t be shy and reach out. Behind the doors at CANNEX, we’ve got a wealth of knowledge with our staff and we enjoy sharing it and helping companies in their journey whether they become clients or not. And if we can’t help, we probably know someone who can. So we’re happy to make that connection as well.

Lesley Lawrence:

Yeah, and I would… My experience in working with you guys, I would attest to that, you have a great team and a wealth of knowledge and one that’s always willing to assist wherever you can.

Kim Muise:

Thank you.

Lesley Lawrence: 

So we’ve talked a lot about business stuff. Now, let’s have some time for some fun. Just to let the listeners know, maybe one key thing about you, I talked about a key takeaway from the podcast, but what do you like to do in your spare time? What’s a hobby or something that you really enjoy doing?

Kim Muise: 

I have quite a few, but I’ll name one. I’d say cooking. I really enjoy cooking and especially when it’s married with travel. And I like to take back to my kitchen and try out some new recipes, new dishes I’ve eaten, new spices, and so forth. That is really my passion, but I really haven’t embraced the mess that I make or the cleanup that follows. What about you, Leslie?

Lesley Lawrence: 

Yeah. Well, I mean, I would agree with you. I like to enjoy the foods when you’re traveling, but I’m not as much of a cook. So that’s why I think you guys… You and I get along as you’re a good cook. I like to eat. Me, I think my spare time these days has been spent with a new puppy. So we had a new addition to our family. So I don’t know if I’m training the puppy or the puppy’s training me. I think it’s more that’s the case. But yeah, it’s been a lot of fun the last few months. And similar to you, I like traveling and trying new things in spare time, which is great. Well, Kim, thank you very much for joining us today. It’s always a pleasure to speak to you and I know I learned a lot and I’m sure our listeners today learned a lot as well. And thanks to all of you for listening to our podcast today in our conversation with Kim Muise. For more information, please visit our website at www.portfolioplus.com/podcast. If you have any feedback, we’d love to hear it from you. Please tweet us at portfolioplus19 or like and share on LinkedIn. You can subscribe to our podcast series wherever you listen to your podcast. So thanks again for joining us and goodbye.

Donna Galloway:

Hi, my name is Donna Galloway, and I oversee the branding and marketing for Portfolio+. Our banking software products and services create value for financial institutions, so in return, they can drive growth and outstanding customer experiences. Today I am joined by Michelle Beyo. Michelle is the CEO and Founder of FINAVATOR, an award-winning fintech and payments consultancy. Now I really need to do Michelle justice with her background and read this. Very impressive, Michelle, and very proudly read just now. Michelle is also a strategic advisor to fintechs, a Money 20/20 Rise Up alumni, a Global Council Member of Women in Payments, the Membership Chair at Canadian Prepaid Providers Organization, a Payment Advisor at National Crowdfunding and Fintech Association of Canada, and a Board Member at Open Banking Initiative Canada (OBIC). With over 20 years of extensive financial industry experience, Michelle started FINAVATOR. She’s passionate about payments and financial inclusion. Most recently, Michelle was named the “Top 30 Best CEOs of 2021” by The Silicon Valley Review and awarded “Most Influential Leader in FinTech Consulting – Canada” in 2020 by Corporate Vision. Wow, that was awesome, Michelle, to read and quite impressive. I would appreciate it if you’d give a few more minutes to talk about FINAVATOR, the company you founded, and perhaps your client base and the services you provide and such.

Michelle Beyo:

Thank you, Donna. It is such a pleasure to be here with Portfolio+ and you this morning to chat about open banking and FINAVATOR. I actually started the organization just almost three years ago; just before the pandemic. I started the organization because I spent twenty years in the corporate space, six years in telco, eight years in online shopping/ affiliate marketing, running Alaska, Lufthansa, Delta, United online shopping mall platforms. Then working with CIBC Bonus Rewards to extend out their restaurant, spa and golf course program, followed by helping conceptualize and launch Aeroplan’s first Shop Local back in 2014. Then I jumped into payments. With not a lot of knowledge of payments, but I jumped into an organization that is the largest prepaid organization globally. Working in their Canadian international head office, I had the ability to work with major organizations, facilitating their digital gift card and physical gift card infrastructure. So getting to work with Walmart, 7-Eleven, VISA, MasterCard, Uber – helping launch the Uber Card in Canada, getting to see the impact that prepaid had on bringing the underserved to services, especially with online infrastructure and actually got to launch WeChat for 7-Eleven back in 2017. Then I got quite nervous that my kids were going to end up with Asian Banking if the infrastructure and innovation in North America didn’t accelerate to try and compete with the innovation that was happening in Asia-Pacific. I took a leap of faith and jumped into the blockchain space at a company that was focused on digital ID and consent on blockchain for GDPR Compliance which led me to open banking. So being the Chief Client Officer at this blockchain company through a year that became a crypto winter, I was not only able to see the startup world, I was able to see what the impact and possibilities of blockchain were, as well as what data consent meant and ownership of data or digital ID. I realized that after winning Money 20/20 Rise Up, I had the passion and the want to create my own organization where I could take all of this back knowledge and help not just one company, but help many and truly trying to help organizations innovate faster. So FINAVATOR was created to help banks, credit unions, FinTechs, and corporations to work better together to drive innovation for consumers and SMEs (small and medium-sized enterprises). I’ve had the pleasure of doing that and growing my team over the last three years, largely working with one big Canadian bank, one large New York NASDAQ-listed bank, about 15 different fintechs, an array of global IT partners, as I’m trying to help drive that innovation in three different ways; either through product innovation, intelligent marketing, as well as strategic sales. With most of my clients, I do all three, but some need one aspect of our services to try and push them forward.

Donna Galloway: 

Wow. So many questions I could come up with, but we’re here about open banking today. So I’ll stick to subject. Amazing background. How did you end up involved with Open Banking Initiative Canada? Well, you have a lot on your plate and you’re moving forward your clients. Was it a need because your clients needed an open banking platform and to have that understanding? Where did it come from?

Michelle Beyo:

It’s quite interesting. I was actually at a conference with Eyal Sivan who’s also on the Board at OBIC. At the time he was still at CIBC. We were at a conference, and we ended up standing outside having a coffee and missing the rest of the conference, because we were just talking about the impact and possibilities of open banking based on what it had done for the UK, what it was starting to do for Australia. This was even before Brazil started to move forth. He joined the OBIC, introduced me to the Founder, Christian Clapton. In August of 2020, I was asked to join the board and Hanna from Wealthsimple who’s now the Chief Compliance Officer was also on the board. But it was seven men and two women. So, a nine-person board. Though it was my first Board, I asked Christian if he would be open to have a 50/50 Board initiative. He’s like, “I have two teenage daughters. I couldn’t think of a better initiative. Absolutely.” I said, “I’m happy to help find these women to equal out the board.” I did so. So I’m really excited that OBIC actually became a 50/50 board with C-level female representation as of December of 2021, one year after we took on the initiative. We didn’t lose the other board members. We just created an Advisory Committee and some of the other board members moved there. So for me, it was passion. I foresee the human data right as the path to the future to ensure not only ourselves, but our kids get to own their data. In the same similar situation, I guess I’ll give you a description of open banking in my sense is allowing for a consumer or a business to have the right to their data, to be able to port it where they need it, to save money, to understand their finances and to plan for the future, as well as to be able to revoke it once the service they received is either no longer needed or doesn’t have the same value. So, to give an example, I like to use telco. I used to be six years in telco, in 1999 and onwards. You couldn’t port your number. So, if you left one telco to another, you had to lose your identity and get a new number just because you wanted a better service or you wanted a cheaper service or you wanted better let’s say coverage. But when they created the ubiquitous ability to have a number swap and move from one telco to the other, you were able to take your identity – your phone number with you. You didn’t need to know how they did it or the infrastructure of how they did that, you just knew that you were allowed and that you could just go to a new telco, take that new service that was more competitive, more suited for you and have it transfer in 20 minutes without any challenge on your consent. That is the goal of not just open banking, but open telco and open finance and open data. You’re in charge to move that data to get that service and that intelligence of the information you’ve collected of your financial history to make sure that that new bank can give you the same product or better, because they can understand who you are.

Donna Galloway:

You make it sound very exciting and very innovative for Canada to hop on this wagon. There has been talks and there has been we’ll call it snail-paced movements in the industry. In amongst that there’s been talk about maybe we should go right from open banking now to open finance to open data as you alluded to earlier. If you could make it in one statement, why do Canadians need open data?

Michelle Beyo:

To access the services that they deserve. When you look at Australia, if I could bring you an example, in Australia, they’re a Commonwealth. They also have a set number of banks. They had a very stable infrastructure, but they made a choice to move as the first country in the world to open data and their date of their first open banking aspect of that was June of 2020. The pandemic happened in March, as we all well know, yet they didn’t miss their date. They didn’t use any excuses. They just ran forth to facilitate the date of starting open banking, followed by: they’re now on a mission to open finance, open telco and open energy and are leading the world in the concept and accessibility of a safe and secure API for data portability and giving the right to the actual citizen through regulation, and therefore have a very succinct movement of timelines and initiatives so that consumers can get access to competitive pricing, new competitors, fintechs being accredited so that they have access to the same pipe of safe data versus having to use something like screen scraping, which I think in Canada has moved somewhere between four million to possibly six million or more. As more and more Canadians are using fintechs, but they’re just unaware that when they’re signing in, they’re using a screen scraping service that is breaching their contract with their banks and leaving them open to challenges that they don’t need to have really. If they had a safe and secure way to share their data so that they could have a dashboard of their financial services or they could access… I think this is my favorite example as a business owner, if I’m using my accounting system and I have 12 different services from telco to credit cards to different banks that I need to feed into this accounting system, I don’t want to download my PDF of my statement to upload to get my information times 12, times 26, to just get the picture I need. I don’t have time. 98% of businesses in Canada are small to medium size businesses. If they’re wasting or spending dollars to facilitate that action, we are behind Australia, the UK and Brazil, because their business owners get to use an aggregation tool that is safe and secure and not putting them at breach of all their financial contracts.

Donna Galloway:

It really is a global movement. My team and I, when we banter about this subject, there’s been a debate that happens about banking as a service compared to open banking, both leveraging an API, one, which was a good description is one is an access to the banking tools. The other is access for consumers to their own data through an API set. So, we’ve bantered the fear of maybe open banking won’t happen because banking as a service is taking off and that’s what the fintechs are using to interact with institutions and such. But I don’t think that covers small businesses. I don’t think it covers open finance and thus open data. Do you have any observations on that and experience?

Michelle Beyo: 

Yeah, so I think it’s hitting a small subset of its opportunity. When you regulate or you implement a safe and secure way with a standardized API, you give access to more than just one company who’s built private contracts with the banks. What you’re doing is driving innovation. When you look at the UK and Canada from a VC perspective, they’re almost 50X the investment because there’s so many unicorns in fintechs that have emerged out of the UK because they were able to go down the accreditation path and facilitate access to this pipe. If we do this through a business-like banking as a service infrastructure, it’s only the tech players who’ve built private relationships with the banks to get access to their API one by one. A – it’s extremely costly. It’s not reusable for any other path. So, we’re keeping the innovation circle very small. Therefore, the long-term perspective of that as the world goes to open data is that the Canadian fintechs and Canadian organizations are pigeonholed to a small subset without potential global growth and our market doesn’t truly then get to understand what this open banking, open finance, open data infrastructure can enable. If we’re competing with countries who already have it, we will always be behind.

Donna Galloway: 

That makes sense. In your bio, you mentioned the under serviced, referred to as the under banked and such that you have a passion to help that along. I think if somebody coming to Canada that loses all of their valuable information, and if Canada were to get on this global network, if you will, of open banking, then that information could be used to qualify them, to let them get established better, to access that information to help them purchase a home sooner and get rent references and such. 

Michelle Beyo:

Yeah, I think that there’s a great example of even just Americans crossing the border with very high credit score, not being able to buy a car without buying it for cash because they have no credit. So, I think when you look at that, keeping it to banking as a service keeps it small and it keeps it to the same subset of services. But when you open the pipe to give a fintech to have to be accredited, to have to have all of these check marks, you’re making it easier for the banks to want to partner with them because they don’t have to do their own due diligence to the same degree, because everybody will lift up the fintechs within the ecosystem. Some fintechs are just focused on one subset of the underserved and that’s their business model. It will never make financial sense for a bank to just focus on that subset. So, by not making it accessible to all who can facilitate the accreditation, you’re still leaving out the underserved in pockets that fintechs are serving and still can’t get access to the core pipes.

Donna Galloway: 

Yeah, it makes sense. I know you’ve been instrumental through the OBIC, Open Banking Initiative Canada, moving along knowledge and information and education of open banking. Recently, there’s been a round table initiative that has taken off. Would you mind providing some more insights into what that was about and the catalyst as to why it’s happening?

Michelle Beyo: 

Yeah, thank you. Well, Donna, honestly, when we started January, we looked back at all the insights and education we were able to facilitate as a non-for-profit organization with our mission at OBIC to help the underserved, to help the consumer, and to help SMEs and the entire ecosystem work together for open banking, open finance to be a force of good for the ecosystem. We’ve done a 99-page manifesto on a force of good with global data that is available for free on the OBIC Canada website. We’ve also done infographs and articles on the consultation paper coming out with the roadmap on August 4th from the Finance Minister, and even Biden’s Executive Order that came out in July before we had our consultation paper. So just trying to help the ecosystem understand open banking in small, bite-sized forms to really try and move the ecosystem forward. As we looked at having the fact that we have now a potential roadmap, a consultation paper in January, what we still didn’t have yet was the open banking lead, an accreditation framework or the data privacy laws to facilitate data portability. It was in one of our weekly chats as OBIC members in early January, where we discussed what are we missing to actually move this forward at a fast and secure pace. What was missing is a Bill C-11, some type of regulation that would allow for data sharing to happen. So, the catalyst for that round table was really to discuss Bill C-11, why it had not moved forward, what parts of it were crucial to help open banking and open data. We’re able to thankfully have Senator Deacon who I’ve done a podcast series with or a YouTube series with ten different episodes focused on the UK’s advantages over Canada because they have open banking. So, he was able to join us as well as Andrew Moor from Equitable Bank, and our ecosystem like yourselves as well as many other members from EPAM to Axway to others.  We just got League Data joining us this week. So, we’re trying to get to credit unions as well as to ecosystem players, tech players, banks, and bring them all together to really talk about data portability. Thankfully, we had Cindy Zhang from Borden Ladner Gervais LLP who’s an Advisor to OBIC and a lawyer for the financial service sector, join us from a regulatory perspective and helped lead through the discussion of the parts of Bill C-11 that were very crucial. What we then did after that first kickoff meeting was send a letter to the Finance Minister, asking that data portability be considered to be added to the bill, the Budget Implementation Act of 2022 to allow for the legal aspects of data portability to be facilitated as a first step to get us closer to open banking. We’re happy to share that it was received. We were thanked for the idea. I don’t know if it’s going to be implemented, but I think the ecosystem is trying to work together. So, we continue to have these monthly meetings. We’re happy to have anybody who’s not a member to join us to be a part of this discussion so that we could refine the comments and try and give this to thankfully our new Canadian-appointed open banking lead Abraham Tachjian who was appointed in mid-March to hopefully take as an industry to move us there faster because other markets in the world like Australia, Brazil and the UK had mandates with regulation that forced out specific dates. In Canada, we are still on this market-led perspective. So, if we’re going to be market-led, we very much need to have a cohesive voice that is trying to move all the pieces across the line and get all of the comments and insights so that we can make a Canadian open banking infrastructure for all.

Donna Galloway:

Yeah. You say market-led, absolutely agree. We need a regulatory body in there to help define how open banking should go forward. But there are a lot of people that have gone on that march regardless of the regulatory guidelines, if you will. How far along do you think Canada is market-driven along the open banking path? So, when we do get it in place, then that’s a further question for you is when. But how do you see the industry being able to react to perhaps as regulatory standards being written that we’re not aware of, or do you think it will all have to come together to get to where we need to be globally?

Michelle Beyo:

Yeah. I can say I’m quite jealous of Australia, Brazil, and the UK. I imagine them often, not all of it was right, but we can learn from all three markets, which are all quite different yet had many successes. I guess I’m quite excited to learn from all those successes and how do we make our infrastructure and our path very clear, intentional with time boxes. Because when you look at the UK moving forth in 2017 being a first mover, they didn’t get it all right. But what they did have the opportunity to do is move forward, learn, and continue to iterate and had very incredible use cases come out of it which we can get into. When you look at Australia, being a market that hasn’t been known for fintech or innovation, maybe stability, but definitely not for innovation, and then take a path to move forth in regulation to have an open data new world vision, and then facilitate it on path, on time with mass oversight. Then you look at Brazil who in the middle of COVID decided from the central bank and government to move forth with open banking and then facilitated it in 12 months. Not multiple. There was a lot of discussion. There was a lot of hard work, but everyone came to the table to facilitate an ecosystem for the people, for their businesses and for access. Brazil is not known for execution, but they came together as an ecosystem and now they’re one of the world-leading open banking infrastructures, moving towards open finance. So, I think there’s a lot to learn. I’m excited to hear the path and how we’re going to get there, but there are pieces we still need. We still need that data portability like we spoke about. We still need an accreditation framework which is the next thing OBIC is going to draft. Nobody has asked us to draft this document, but we’re going to work with CIO council, our members, and Global Insights to draft something to hopefully get us there faster. Because I think all these pieces, if we’re going to be market-led, we have to lead and we have to find time and voices to ensure that we cover all aspects so that we do have an ecosystem that is for many, instead of a few.

Donna Galloway:

It sounds like there is I’m going to say, a bit of a pot of gold at the end of this open banking journey, because like you said, Brazil jumping on it and turning around so quickly, I don’t know, some data varies, but 300 to 500 fintechs that are on the open banking network within the UK. We’ve witnessed in Canada, fintechs attempting to come in and parking it until we are better ready for them and such. Do you think there is going to be a lot of job creation, a lot of economy cultivated out of this happening, this initiative?

Michelle Beyo:

Yeah, definitely. I think when you look at the UK or Brazil, the amount of dollars of investment of new companies, of added business models, of additional services, and even when you look at the UK, because I’ve done a lot of research on it, the CMA 9 have not fallen off the top 100 list. Many of them have moved up over the five years because of their fintech partnerships or investments or new business models. So, I think there’s quite a bit of advantages for the banks. A – if we just talk about KYC Compliance and AML, many banks have to do that onboarding process seven times, right? Because they have seven different products in seven different departments. But they could use open banking internally for their own clients without having to have the cost of holding seven data records for that same customer. So, there’s advantages that can be looked to, to find out ways on how banks utilize open banking to be more efficient internally and more innovative externally. As well as the fact that I mentioned, if fintechs are accredited, it can speed up the bank’s partnerships with the fintechs to get the services their customers are looking for in a shorter period of time versus an 18-month roadmap. They might have missed the mark, but if they have accredited fintech they could partner with, they can get to market faster. So, I think there’s, in my opinion, advantages to all. One of the use cases I enjoy the most is in the UK. They’re at five million users of both in banking now, but I was speaking to Simon Lyons from Pay.UK, who used to be at OBIE (Open Banking Implementation Entity), and he was the one who was working directly with the government to figure out how they can use open banking for tax payments. They were able to initiate by just adding a box on their tax payment infrastructure to say pay directly or “Pay Direct” is what they called it, and then consumers could. It was just called new pay direct option. They clicked on it. It gave them open banking accessibility to facilitate that transaction and that transaction not being lost, being marked directly to their tax number. Thankfully, I do not work in taxes, but what I have heard is that there is, like any business, if you are taking in mass amount of payments, there are going to be lost payments that need to then be investigated. What this did was reduced those amounts of lost payments and got the money in faster, more efficiently, and the pickup rate was incredible. I’m looking forward to doing a case study so that we can share some of this data, but there’s mass upside for government organizations through open banking as well.

Donna Galloway: 

Well, that’s a wise use case too. Let Canada hear, let the government hear that they can get their tax money much easier and more efficient. Do you have an innovative, a very innovative type of use case that you want to talk about today that you can think of?

Michelle Beyo: 

I think the biggest thing, A, is if we could help the government get their taxes paid faster, B, if our SMEs could get their accounting to be seamless in the sense of how they collect their data. Then from a consumer standpoint, a quote that OBIC Founder Christian Clapton quotes often, from 2019, so before the pandemic, most Canadians are $200 away from insolvency. I can’t imagine what their number must be after the pandemic or while we still are coming out of the pandemic. But if they could have better visibility or have suggestions to financial services that are more suited to them to help them save or understand how to save for the future, then it’s largely to ensure Canadians can have better options, more competition, as well as services or visibility in a way that will allow them to plan for their future.

Donna Galloway:

Michelle, you’ve been so knowledgeable in this area. I’d love the story about you wanting to have a 50/50 Board to make sure that women are represented properly in the financial industry, let alone the technical industry. I hope you keep that going for daughters all around the world and the next generation, as they say. If you had a crystal ball, do you have a when for open banking for Canada?

Michelle Beyo:

I’m a glass half full kind of person. So, my hope is that because Canadians are innovative, because our ecosystem knows how to work together, we did implement the number portability within our telco infrastructure, we did implement and we’re one of the first to implement EMV cards for tap back in 2015. So, I’m hopeful that the ecosystem comes together and facilitates open banking within 2023 to start to move away from screen scraping and give Canadians and business owners an option to get access to their data, and also the biggest thing, Donna, is to be able to revoke their data when they no longer need that service. So I am hopeful that with Abraham Tachjian and organizations like OBIC and organizations like Portfolio+ , League Data, EPAM and all of these, Axway, and others that are coming together to try and work on their own time to drive this forth, that we will get to an opportunity for Canadians and our ecosystem to get in more VC dollars, to inspire more fintechs and to have our banks flourish through innovation and through an access point that is secure and safe for all of us to facilitate financial services.

Donna Galloway:

Awesome. Thank you so much, Michelle. Appreciate you being here today.

Michelle Beyo:

Thank you so much, Donna.

Dianne:

What a wonderful and insightful conversation, ladies. Thank you, Michelle, for spending time with Donna on this important topic, to you, our audience for listening to this podcast episode.  For more information, please visit our website at portfolioplus.com/podcast . If you have any feedback, please feel free to tweet to us at portfolioplus19 or like and share on LinkedIn. You can subscribe to our podcast series wherever you listen to your podcasts and you can add yourself to our mailing list, and we’ll notify you when our next podcast episode is available. Until next time, all the best from the team here at Portfolio+. 

In today’s episode, we are focusing on the journey from a financial institution perspective, what open banking means to a financial institution, the opportunities they see, and what challenges they may face, as well as- where are they on the journey? Joining me today is Don Coulter, the Chief Executive Officer for Concentra Bank. Don is concentrating on strategy to enable Concentra Bank for long-term sustainable growth. In addition to being a bank, Concentra partners with credit unions to provide solutions that support their membership retention and growth. With these deep roots in the cooperative movement, Concentra is also a strong supporter of the open banking movement. Thanks for joining me today, Don.

Don Coulter:

Dianne, it’s great to be here. How are you today?

Dianne Cupples:

I’m good. Thank you. Very good. And you?

Don Coulter:

I’m Excellent. Thanks. 

Dianne Cupples:

Great. Well, Don, I’ve provided a brief introduction of Concentra to our listeners. Is there anything that you would like to add just so they have a solid awareness of who Concentra is and what your services are?

Don Coulter:

Yeah, definitely. Thanks. Thanks very much. I appreciate the opportunity to speak with you today. Concentra Bank is a mid-size bank in Canada. We are the 13th largest Schedule I bank, and Schedule I means banks that are owned by Canadians or Canadian entities. We are a midsize bank. We have both a bank license and then a trust license as well. The organization has been around for decades. We changed our name to Concentra in 2005. As you mentioned, our legacy comes from the credit union system. So we started in the Prairies; the Prairie provinces in Canada, back in the late 1930s. We were an integral part of the credit union movement in Canada, which coming out of the Great Depression, we were there to help businesses and farmers and others with their banking needs and financial needs. But fast forwarding up to 2005 until today, we have rapidly changed a lot. Today, we continue to work closely with credit unions to help them be successful, and their members as well. But we also have a very thriving, dynamic and growing business in banking outside of the credit union system. We offer mortgages to Canadians, provide business banking and commercial loans. We have an equipment finance subsidiary that finances construction equipment and transportation equipment; things like that. We have a consumer finance business as well, which is more unsecured lending for different types of things ranging from vehicle finance all the way to home improvement finance as well, and we offer foreign exchange services, securitization services. We have an internal treasury consulting practice as well. That’s mostly the bank. The trust company does registered plan administration for Retirement Savings Plans and Registered Education Savings Plans. We do trust and estate planning, and we also do corporate trusts or specialized trusts. Now, the way we deliver our business is somewhat unique in Canada. We have no branches. We are a completely branchless bank, and we do a lot of what we do through partners. We have an $11 billion bank and a $30 billion trust company, which is fairly large for our employee base, which is only 400. And so with those 400 people, we partner very closely with FinTechs, technology companies, other financial institutions to be able to deliver what we do. We are investment-grade rated as a bank, which is an important thing. We have also been recognized as one of Canada’s best managed companies for 18 years in a row.

Dianne Cupples:

Great. Thanks for sharing that, Don. I think as we go forward with today’s conversation, that history is really going to help through the conversation for open banking. You’ve got a tried and true tested model with a wide variety of services. I can see how open banking can play a very important role with Concentra’s future. Let’s talk a little bit about that. We have talked about how the movement to open banking in Canada is a journey, which everybody we have talked to, agrees. We do not know when we will come to the end on the journey, but it will be a constant evolution as we get there. Concentra, as you said, has been founded in the cooperative movement and is providing financial services, not only to customers, but also to the credit unions. The interesting part about the credit union movement is it has a customer first ethos, a cooperative mindset. Open banking’s core purpose is to provide customers with control over their financial data and who can access it. Do you view the customer first ethos as a valuable asset on the journey to open banking for Concentra and for credit unions?

Don Coulter:

I really do, Dianne, because I think open banking is going to provide more what I would describe as “democratization of banking.” It’s going to allow those consumers, whether they are credit union customers, or as they call them, the credit system members, or banking customers. It is going to give them control of their data, it is going to give them more transparency, giving them access to the data. The credit union system, year after year, is usually ranked number one in the country among all deposit taking institutions in terms of customer service. The members of credit unions really enjoy the service that they get. I think a lot of the reason is those cooperative values and the principles of cooperatives are such that it is very clear that the whole focus is to help the member be successful on their financial journey. I think open banking is going to provide more transparency, as I said before, which is going to allow for, I think in and of itself, better decision making and also I think it definitely will spur more innovation and competition in banking as well, which will result in credit union members and other consumers getting better applications in which to work and do their banking. So better experience in terms of better PFM or Personal Financial Management tools. I think it’s going to allow them to have a better picture of what their overall financial position is. I think the innovation that will come out of open banking will result in many different options for people to bank. Some have talked about open banking maybe leading to the unbundling of banking services, meaning that traditionally big banks, the holy grail for them is to have large share of wallet. You want to have eight, nine, ten products for each of your customers. But I think with open banking, maybe I do not know this to be certain, but it may lead to a best in breed approach, where there might be one FinTech or credit union, bank, FinTech partnership that is really good at one part of lending. It could be consumer finance. They might specialize in that, and it could result in another being very good at wealth management. We’ve seen some robo-advisors in our country that are very good at that as well. I think with the credit union total focus on the financial well-being of their member; improving their financial success, I think open banking will give them more choice and more competition, which I think is good, too. I think the transportability, the portability of data is also going to help them potentially to switch from one provider to another, so they have more choice. I think more choice, more competition and more innovation is always a good thing.

Dianne Cupples:

Don, maybe we could clarify for our listeners why do credit unions call them members versus customers? That’s a nuance that’s within the credit union movement.

Don Coulter:

That’s a great question, Dianne. If you think of a bank in Canada with these big, huge banks, there are customers and all of us, or probably most of Canadians are customers, and then there are shareholders. The shareholders own the banks. But often, those are two different categories of people. In the credit union system, the customers are the owners, and they have a membership in the credit union. Unlike one of the big banks in Canada, if you want to do business with a credit union, you have to take out a membership. It is not that expensive. It’s often anywhere from $5-$20. Once you are a member, you can then do your business. You can have transactional banking, mortgages, commercial loans, whatever it is you want to do, wealth management. But then, as an owner, you get a say in the governance of the credit union and you get to vote on the board of directors, you get to give your perspectives on the future direction. In some cases, you get paid what they call “patronage dividends” as well. You are a customer and an owner at the same time, which is different from the banking system typically. 

Dianne Cupples:

That’s a great model. Canada has, let’s say, approximately 231 credit unions, and I think it is give or take 5.9 million members, when you look at the stats depending on the day. Combined, that’s a large group of owners, customers, and members within the movement. Do you see that large group coming together as an advantage on the journey to open banking? Is there an opportunity for credit unions to come together and partner? 

Don Coulter:

I really do. The nature of the credit union system is that there is a smaller number of credit unions now than there used to be. There used to be over a thousand credit unions, and the credit unions come in different sizes and shapes. You have some really small credit unions, midsize credit unions, and really large ones. In terms of numbers, most of them are small and medium size, and you know, banking is a scalable business. The expenditures you need to run a financial institution are quite high. So traditionally, the model has been that credit unions have banded together to create, to fund and capitalize these shared service entities that will provide a lot of the different technology and even marketing, human resources capabilities in a pool basis. They do not all have to have … When there are a thousand credit unions, you wouldn’t have a thousand separate technology companies or a thousand separate HR departments and things like that. That has changed a bit because the reality of the cost of running a financial institution today has gone up significantly. Out of necessity, a lot of credit unions have merged. You are  seeing a smaller number of credit unions now, but the legacy has been to have these provincial centrals, they typically call them. You probably heard of Central 1 or Saskatchewan Central and others. They are like a holding company that all the credit unions will invest in, and they will do a lot of the functions, liquidity provider and some of the other things I talked about before. Built on that legacy of pooling together and then the better interest for the greater good, to me, it makes a lot of sense for credit unions to again band together, come together to think about solutions for open banking on more of a collective basis. Clearly, some of the credit unions are quite small in smaller communities, and for them to have the wherewithal, the knowledge base, the expertise, the capital and technological investment at scale, it is just not plausible. I think that coming together makes a lot of sense to manufacture that scale. I think also, just in terms of having a seat at the table and being able to influence some of the direction of open banking, in terms of the standards and the way that the legislation gets rolled out, it’s going to be much more effective for those 5.9 million members through their credit unions to speak with one voice because they have obviously a lot more clout than if they all separate and go on their own. I think, yes, it’s a very good point. I think when we look at the rollout and the things are going to happen the next couple of years, open banking coming together makes a lot of sense.

Dianne Cupples:

Do you think that the credit union movement in the way that they could come together and share those resources actually gives them an advantage over the larger banks? And if so, why?

Don Coulter:

Yeah. I have worked both in the banking system, Dianne. I have been a banker with a large bank, as well as I worked for a credit union, and now I work for a midsize bank. I have seen a few things so far in my career. In Canada, the big banks versus the credit unions are typically seen as a David versus Goliath kind of situation, right? The Goliath being the big banks, and then the credit unions being little David. With that, I could probably give you a list of advantages that the banks have. It is much longer than the credit unions. But I think one thing that the credit unions can do is they can be more nimble, and they can be more agile, especially when it comes to technology. I think that open banking is going to spur a growth in innovation as I mentioned before, and I think you are going to see more success of FinTechs as well. Well, who is better to work with a FinTech? Some may think a big bank, but the large banks are not always the easiest to partner with. Their technology is complex, they’ve already got big scale, in the way they do things. For a small startup FinTech to work with those big Goliaths can be intimidating and it can take quite a long time. I think an advantage that the credit system has is that they can embrace a partnership with a FinTech or a technology company, they can invest the time because the relative ROI are impacted when you get as much more significant. I do think, truly, that there are some advantages that the credit system will have with open banking over the big banks for sure.

Dianne Cupples:

That’s great. Now, you’ve keyed on a point there, access to FinTech and technology partners. How do you see working with partners evolving in the future as open banking becomes more widely adopted? You have hinted that the credit unions might have the ability to work more agilely and take advantage of newer FinTechs faster than the banks. What would you be looking for in a partner today, and then to help you in the future as you grow?

Don Coulter:

Well, I heard someone speak about this recently, about open banking and credit unions and banks and FinTechs. The thinking went to, in the future, the relationship that banks have with developers, coders, computer scientists – those who can develop code is going to be a critical success factor for them to move ahead. If you think about that, banks typically do not have a huge amount of technologists inside their company. They have people running architecture and operations, the core, the network and things like that. But in terms of developing new innovative applications and different types of ways of banking, they do not have a lot of those internally in their organizations; but they need them. Obviously, they are going to have to partner with organizations, whether it is FinTechs, as I mentioned a few times, or technology companies in order to have that synergistic one plus one equals three partnership so that they can get into market more quickly. To me, it is going to be very critical. Also, when you look around where we are today, hopefully at the end of the pandemic, we are seeing this massive fourth industrial revolution. Digitization is happening all around us. What that is actually resulting in is a dearth, a shortage of technology people. Companies are finding already today that as they want to digitize their agenda and their business model, it is hard to find those. That talent was always scarce in technology in this country has become even more scarce. I think a forecast here would be in the next three years is that it is going to get much, much more scarce. The ability to hire these people into your banks is going to be challenging, and so I think getting strategic partnerships with technology firms and leading technology providers is going to be critical. I would say right now do it now before it is too late. 

Dianne Cupples:

Let’s switch gears a little bit. Concentra offers a wide range of products and services. You have said it yourself – that open banking will allow us to bring different innovative and unique products to market. We spoke about it through FinTech partners, and technology partners. Let’s look at what it means to the servicing side. Concentra does servicing on behalf of, as we have said, credit unions and brokers. You have a wide variety of different business verticals that you support, as you outlined at the beginning in the introduction. How do you see the adoption of open banking supporting the servicing side of your business model? Where do you see some opportunities or even some challenges?

Don Coulter:

Yes, it is a good question. I will get to open banking in a moment. I think when we look at our strategy at Concentra – we are a bank that is owned by the credit union system that serves both the credit unions themselves and their members, as well as the Canadian public and Canadian businesses. We are quite intertwined. We essentially have had for some time, although do not call this a platform strategy, where if you look at the credit union platform we have, we have 230 credit unions that we service and sell products to. We are able to tap into our ecosystem of specialized mortgage providers, specialized banking providers to be able to connect those two together in our platform. As we grow that, there are network effects as well. We have to service that relationship and we need to have great technology to do it because the consumer wants that “Uber”-like slick seamless experience in how we service our platform and how we provide the great products that members of credit unions want, and non credit union customers as well. Now, open banking, I think, creates a pretty intriguing opportunity because it will, I believe, allow us to provide product propositions for people that they can gain access to more easily. Today, there is some stickiness in the relationship. It is sometimes difficult to move away from your bank. If you are a business, for example, you often do not leave unless something bad goes, something bad happens or you are growing, or something like that. But with open banking, it makes the portability of the customer much easier; it is much easier for it to happen. I think that when we are servicing customers, getting the ability for customers to move more of their products is something that is quite intriguing. I think also just having more data, and better, rich, robust data allows us to move more on a more agile basis and more quickly. If we are looking at things like mortgage decisions, having better data and more granular data allows you to measure the risk much better, allows you to price the risk as well. I think it can be a facilitation to speed of transactions, ease up service, which is really what customers want, and again, going back to what I said earlier, Dianne, overall growth in options in how you would bank. We are certainly focusing on that; the servicing perspective and thinking about it as we charter our strategy for open banking. 

Dianne Cupples:

That’s great. That’s great. As you know, Portfolio+ is on our journey to the cloud with our open banking solution. The driver behind that was really to enable us with the ability to deliver more efficiently and frequently, and it also sets the stage to support our customers in their digital transitions or transformations today, and perhaps for open banking in the future. We are currently targeting an API release every 30 days so that our customers can have access to it and be as responsive and to use your word “agile” as much as possible to be prepared for their markets. We have talked about how it will help your servicing side. You have offices in Regina, Saskatoon, British Columbia, Toronto. I think you are well across most of Canada. What about your internal business opportunities for Concentra? Does open banking and APIs provide any efficiency to your team and specifically that supports your 400 employees that are going to service your customers? Does it help you there at all?

Don Coulter:

I think it does. We have a number of FinTech partnerships. Some are customer facing and some are more embedded internally in the company to help us do our business more easily; to improve the employee experience. We have one such partnership with a FinTech. It has helped to improve our overall mortgage loan origination system. We have gone from where we were a few years ago from a manual, Excel-based environment to one that is quite seamless, very intuitive, really tailored to the type of business we have. Again, with open banking, being able to get more data and more rich data, combined data, is going to help us internally as well. I will give you an example. We do mortgages often for people who are running their own business. Typically, in Canada, if you are running your own business as opposed to being an employee, it can be a little bit more difficult to qualify for a mortgage, because your personal financial matters are intertwined with your business. Sometimes it is harder to demonstrate for a bank loan officer what your overall picture is, and for that reason, it can be difficult to get a loan, or you might have to pay more, or it might take longer. Open banking with the collection and aggregation of all the data together, is going to give that one transparent view. For our people inside, our loan officers or adjudicators or underwriters, they are going to be able to see a more transparent, more complete picture and be able to make a better decision for the bank, which is always a good thing. We want to make sure we are making quick decisions, but also to be able to make a better customer experience for the borrower because we will be able to get back to them more quickly. You will not have to have a back and forth on questions. Often in lending decisions, it can go back and forth, back and forth, and I think it can with some of the advents, some of the developments and things that open banking could provide, it will make that a much faster experience. 

Dianne Cupples:

That’s great. I can see how it would benefit definitely on the lending application side and the commercial lending side as well, too. That is an even more complex process. Let’s talk about financial systems now and regulatory oversight. Canada is well known for having strength in our financial systems. Many people think that our strength there is why we weathered the 2008 crisis so well. As a bank and servicing provincially regulated credit unions, your regulation must be top of mind for you in everything that you are doing. What would be the ideal approach in your mind to the regulations or standards that come forward for open banking, especially since you are playing in both markets, both regulation areas?

Don Coulter:

Yeah, that’s great question. As a banker, regulations are everything. We can fully comply, we need to make sure that we are very strong in terms of regulatory compliance because we are in the trust based business. Our customers have to trust us. The investing market has to have great credibility in the organization; secret credibility. Our regulators, of course. We are always spending time upping our game on regulations. I think your point about 2008 and how we sustained in Canada so well, this credit crisis that happened south of the border, it is kind of a testament to the strength of the Canadian banking system. I also think, though, that there is a balance or a trade-off between strength and rigorousness of regulations on the one hand, and innovation on the other. If the regulations are crafted in a way that are just stifling or just too difficult, then you are not going to have much innovation happening. I think you used the word, Dianne, striking the balance. I think it is that striking the balance between making sure that there is confidence in the Canadian marketplace, in the financial institutions that Canadians deal with, while also creating a welcoming environment and incentive for new players to come in. Really, I would say, in a positive way, shake things up in terms of providing better banking for Canadians. We’d like to see one standard, which is the pathway that is happening. Our regulators are great in Canada, and they do want to do that balance that I mentioned to you, but things are moving quickly. I think there has to be good collaboration within the industry, meaning the banks and with the regulators to talk about what open banking could bring. I believe that it is actually a potential solution to better prudential regulatory oversight because, again, you are going to have more transparency. I think better control, as well with data, when it is done right. Things like anti-money laundering regulations and customer regulations can be, I think, accomplished better, more effectively and please regulators as well when you have again more data, aggregated data, richness of data, and you have one version of the truth data as well. I think the opportunities are there and I think we will get there. I think it might take a bit of time. But that is something I can see being a really positive aspect in open banking. 

Dianne Cupples:

It is interesting the way you put that. Agree we have great stability, but some people do believe that that stability has restricted our ability to be innovative to have a market with competition and for consumers to have the ability of choice, and I think you said it earlier, to ease of movement across the different banking solutions and systems that are available today. I think as a consumer now, if we look at it, it not only gives you the ability to make better informed decisions, but I think you could also say it does the same for the consumers. I now have access to all my financial products across one view, and I get to control my information, who I am working with, how I share it, and that in itself could be powerful. Do you see it having that same benefit for the consumers of banks?

Don Coulter:

Yes, 100%, because this is all about the consumer. You talked about the credit union ethos of customer experience and member experience, and this ultimately – it is about the safety and soundness of the banking system, for sure. But it is all about the consumer, putting more power in the hands of the consumer, giving them those things you talked about. More transparency, more control, more understanding. I think people are becoming more alive to the fact in society that their data is used in ways they maybe did not understand it. You look at some social media companies, of course, and others who are monetizing their data. If people want to control it, then they want to have the traceability as well. But I think that in addition to that consciousness of knowing where is my data, who is using it, do I have control of it, can I see it all? What really excites me in Concentra is the innovative growth we are going to see in the future, where there will be that incentive and the facilitation to have new players, new FinTechs, and new innovative companies provide solutions to banking we never even thought about before in this country. I find that exciting. 

Dianne Cupples:

We cannot not talk about the pandemic because we have been living through it. It has been a challenging year for consumers in Canada, all over the world as a result. You have mentioned it a little bit earlier in our conversation. It has impacted our financial economy. We have had many consumers that have had job losses, we have talked about business financing challenges, closures, and many other things that we have had to face. Thankfully, as you mentioned, it looks like we are coming out the other end on the pandemic, which is wonderful, and things are starting to open back up. But I think open banking has the opportunity to change the financial ecosystem, like we have said, in a very positive way. As we shift and focus on recovery, financial institutions, and we have talked about a few things that need to provide access to funding other products and other new services. Other than what we have talked about already, do you see any other possible use cases for open banking in Canada that might help in our post-pandemic recovery, and to your point, even future growth?

Don Coulter:

I think that there are many. I think I mentioned before the possibility of the unbundling of banking, which is unsettling to some bankers, I think. It may happen, may not. But I think with that, you could see the conditions for more peer-to-peer lending. If you and I know each other’s data, and you have some excess capital, and I need some capital, right now the bank is an intermediary. But in the future, could the bank play a different role, maybe on a platform, to facilitate the connections but actually have more of a potentially direct lending relationships? If you think about, well, open banking will give more certification of the data, you have a much better way to assess the veracity of someone’s financial position if they choose to give consent for you to see it. Then if you look at platforms like eBay or Amazon where you have a choice to conduct commerce, but you can actually see the rating of the seller. Based on a certain rating score, you get confidence that this is a place that I want to do business with if you read reviews. I think open banking, just thinking outside the box, it could lead to proliferation of more direct banking. Us as bankers need to think about what role do we play if there is a disintermediation of banking? I don’t think that we are going to not need banks; I think that banks will always have a role, but I think we need to evolve and think about that. Peer-to-peer lending. The opposite side of that, of course, is investing as well. Coming out of the pandemic, there are significant percentages of the population that have been badly affected. Their credit has been bruised, their small business has been damaged or even gone insolvent. I think they are going to have a harder time to rebuild their credit to get back up into a place where they can stand up on both feet and move ahead. I think another thing that is happening is innovation around the development of new methods of having a credit scoring. Traditionally, we had a credit score or a Beacon Score here, a FICO Score in the US, that was based on very traditional metrics of for example, if it is for a mortgage, what is the loan to value of the house versus the mortgage size? What is your capacity to repay based on your service coverage ratios? Well, now I know that there are innovative ways of doing credit scoring based on things like behavior, social media indices, lots of AI and machine learning. I think that the model of an AI lending decisioning system is great, but it needs to have the fuel or the data from open banking. I think that can help people. Hopefully, there will be an industry. I think there is always innovation that happens. An industry will look at some of the people who maybe are getting back on their both two feet, as I mentioned, after the pandemic, and give them a chance and lend to them based on some assurance they get with alternative scoring measures. 

Dianne Cupples:

Those are great use cases. It’s exciting times. It’s really exciting. As a software technology partner with financial institutions, as I said, we are excited to be on the journey with open banking and collaborating with our partners. Concentra has been a great partner for us to work with. In many ways, open banking is already here today. Because we are leveraging APIs, we are leveraging interfaces and connections with other technology partners. We just do not have the full open banking, consumers own your data…we’re started. We’re on the journey. What steps is Concentra taking now to prepare for open banking?

Don Coulter:

We are working great technology partners like Portfolio+ to make sure that our architecture, our positioning from a technology perspective is flexible, cloud-based, ready for us to grow and scale. What we are going to need and with our strategies going forward is we are doing lots of research and consultation with experts. We are looking at what was the UK experience? How has it been so far? How about Australia? Even Brazil- looking at other countries. In Canada, you can sometimes see the future of banking by looking to other jurisdictions around the world. With that, we are thinking about … Our core strategy, again, as I mentioned earlier in our chat, was that we use partners. When we look to the market to bring innovative new product lines, we are not a coding shop ourselves. We are working through open APIs with FinTech partners to bring in great innovative solutions that are giving great customer experiences. We are thinking about with that open API FinTech partnership strategy, how do we feel all the benefits of open banking that will come forward? We are consulting, we are setting up our strategy for a few years ahead, and we are thinking about some of these partnerships that we want to have. We are thinking about doing things. To foster innovation, we have often had internal hackathons with our employees, asking them to come up with great ideas how to make the company better. We have an idea now to potentially do an external hackathon. Invite FinTechs to come in with ideas on how they would utilize open banking for a consumer-driven solution to improve things, and have a contest and give out some prizes, maybe commit to a partnership with them as well. We are  thinking a lot about it. We had board meetings just this week, and we got intel from banking, really good discourse on you know, what are the opportunities, how do we even do it right? So lots of wheels in motion, Dianne. 

Dianne Cupples:

That’s great. You mentioned about looking at other markets and see how they are doing, and the UK is having great success. We have talked about how you are preparing for open banking. What would you tell the customer or the member to do to prepare now to start preparing to understand and get ready for open banking and what would you tell the credit unions to do? What would you guide those two players? Because we need us all to come together. What would you think they should be doing now?

Don Coulter:

I think that on the credit unions, we have had webinars at Concentra nationwide with credit union leaders, CEOs, CIOs, branch managers; people like that. We have had industry experts like Senator Colin Deacon, and other people who are passionate about this to come in. The first thing we are trying to do to help is awareness. Because it is not necessarily … I think for me, it is really growing exponentially that thinking about open banking, all the things like that. But I think for a lot of people, it is not really under the radar. The first thing with credit unions is to foster awareness and commit to creating a collaborative environment where we can work together. With respect to individual Canadians, I think in this country, we are sometimes criticized for not having the greatest financial literacy. Sometimes, often actually, you hear stories about the debt load that Canadians have, and things like that. I think there has been some great moves by schools in the last five years to introduce more financial courses in high school. I would encourage all Canadians to do their own research because you are responsible for your own financial well-being and financial literacy. There is no shortage of information on open banking that you can read, YouTube, online and talk to your financial services professional, your financial planner. If you are at a credit union, go to the Annual General Meeting and ask them, “What are you doing in open banking?” Give us a call at Concentra. We’ll be happy to talk to you about open banking and banking in general, because we have a passion for it. 

Dianne Cupples:

Don, I really appreciate you taking the time to chat with me today. Thank you for sharing your thoughts, and Concentra’s approach to open banking and this journey we are on. It was a pleasure. 

Don Coulter:

Dianne, the pleasure is all mine. Thank you so much. I really enjoyed it. 

Dianne Cupples:

That’s great, thanks. All the best. To our listeners, thank you for listening to our conversation with Don Coulter from Concentra Bank. For more information, please visit our website at portfolioplus.com/podcast. If you have any feedback, you can reach us or follow us on LinkedIn or Twitter at Portfolio+19, and you can subscribe to our podcast series wherever you listen to your podcasts. You can also add yourself to our mailing list and we will notify you when our next podcast is available. Until the next time, all the best everyone. Thank you.

As security is top of mind, in today’s episode we will be focusing our discussion on making the cloud journey secure. We are excited today to have Iain Paterson, CEO of Cycura with us. Cycura provides top-tier security services which helps organizations understand their cyber security exposure and then help them become more educated on the cyber security solutions available to them. Also joining us today is Michael Swan, Vice President of Research and Development here at Portfolio+. Welcome gentlemen.

To kick things off, while I provided a brief overview of your company, I think it would be great if we could hear a little bit more about you and your background in the financial services industry. Could you share a little bit?

Iain:

Sure, thanks and thank you for having me on this first podcast. It’s a tremendous pleasure and honour to participate. I’ve been in cybersecurity for nearly 20 years now. I started out in banking working at TD. My background is in systems engineering and I used to help build and deploy a lot of the core applications that were used either internally for bank functions, or externally – customer facing. Everything from anti-fraud systems to parts of the trading platform and things like that. I did that for several years at the bank and then I pivoted over into a dedicated security role working in security operations. My knowledge of the banking systems, how they all interfaced, and how the networks interoperated was an advantage that I had over people coming into the organization in a security role, never having kind of experienced it before. So, I did that for eight or nine years and then pivoted over to healthcare which was a real eye-opener. In banking, you are used to having every tool at your access. Sometimes multiple copies of it, and then healthcare is kind of the opposite where you have no tools but still have the needs for a very high level of security. I then moved into government. I was Director of Security Operations for an organization called e-Health, so I was responsible for the health records for about 13 million people in Ontario. Finally, I joined Cycura and that was six years ago and so I’ve been building this practice to offer a high-level security consultancy to customers in multiple different verticals, but banking is certainly, and FinTech is certainly one of our focuses. Our focus is around very technical security assessments; helping people identify where there are bugs and vulnerabilities, logical flaws, areas that could be abused by an attacker in applications, or in infrastructure, particularly as we move more towards cloud-centric infrastructures. We are helping people basically identify those vulnerabilities and make sure they remediate them in a very pragmatic way.

Dianne:

Great, sounds interesting and very exciting. Mike, we know that security is top of mind for everyone, and you have been working with Iain to ensure our platform at Portfolio+ is secure and cloud ready. How would you describe our journey so far?

Mike:

We have been on a fantastic journey of looking to address open banking and really open our system to play with in an open banking ecosystem. But when you are playing in an ecosystem, you certainly run into situations that change the entire security regime and paradigm that we need to address. And so, we’ve been working together with Iain’s company for three years now, specifically around securing our API set and open banking, as we move further into that. Now we are looking at also migrating from being a software provider to end customer to being a full cloud-enabled, cloud native delivery system, and operating it on behalf of our customers. This again changes the entire security implications and regime as we move from being a pure software supplier to being a full data operator within a cloud environment. And so, we’ve been on the journey for the better part of three years now, and we’re moving very quickly and expect to be fully cloud enabled by the end of this year and we will be available in the marketplace.

Iain, when we think about something like that, what are some of the things that we need to be thinking about in that type of environment?

Iain:

The transition and journey to the cloud is something that a lot of organizations are going through. It is an interesting time in security, computing, architecture, and infrastructure. A lot of organizations started out in traditional infrastructure, much like yourselves. You were developing software to be deployed on premise, run on big infrastructure within organizations. Then the cloud comes along, and a lot of the mainframe people out there will say we did that first (the whole shared computer resource) but cloud came along and commoditized that ability to put workloads in different places and fit the resource demand in a flexible manner. This really changed the way that people looked at things like, do I need to have a giant data center or multiple giant data centers for redundancy? Do I need all my workloads running in there? And the answer in banking is that I probably need both. A lot of organizations – software as a service organization, especially ones that are newer, will never have their own data center, just because they can depend on this public cloud service to operationalize their entire business. And that is neat, and you couldn’t have done that 10 years ago, right? You could have tried co-location or stuff like that, but you still owned servers. It is very different these days. What we need to think about when we migrate towards that though, is obviously the data that we are entrusting into this public infrastructure. How are we moving that data in there? How are we securing the data that is in there? Now that we have got so much flexibility now to allow other participants in the ecosystem, as we get so many participants, how are we sharing the data with them or giving them access to the data for them to transform it or to you know, compute against it and draw information out of that data? How are we securing that? Those transactions? How are we securing the data when we put it into the cloud and how are we securing the cloud itself? And something that we always say to customers as they go to the journey is that the cloud is going to be very safe from you. The cloud will always be secure in of itself, but what you put into the cloud, is not necessarily secure because you are using it as an underlying infrastructure to deliver a service and to deliver access to data, or whatever you’re going to do, computationally. But you have the responsibility and the liability to ensure that what you build and deliver on the cloud is secure. I think a lot of people think that inherently just because you put something in Amazon or in Google Compute, is that it comes with many protections. There are certain security plug-ins and functions and features that you can enable and buy, and that is very cool. Security has become a marketplace too, but your underlying application still needs to be secure and the way that you manage data needs to be done in a secure and sane fashion. Otherwise, you have a ton of risk and I think people understand that risk maybe even less than they did when it was with traditional infrastructure.

Dianne:

This really opens up a lot of different areas that you need to look at. How can we defend against this, when if we are hearing it correctly, there really is no perimeter around what we need to do? Like it is a vast area that we need to try and secure, not just from our point of view, but also for the partners that we work with?

Iain:

You used a great word there: perimeter. That is how we used to think about security, right? Everything was inside our organization or inside our data centers, and the whole concept was that we are going to have a defense in-depth strategy, we are going to build an iron ring around the infrastructure that we own, and then we only allow certain parties to transact with us. Conceptually, it is still kind of the same, but it is no longer you know, your corporate office; I mean, nobody works in their corporate office anymore today. So, the perimeter now lives at the endpoint, so where you are doing your day-to-day business. It lives at the edge, if you are computing workloads, kind of at the edge of the network for the purposes of speeding of transactions, or to make transactions more lightweight, and that is interesting. That is kind of an evolving space. Certainly, that cloud infrastructure the people are putting a lot of their workloads into is now part of your perimeter. The question that people need to think about now is, if I have built a security program and it is based on a set of policies and standards and controls, how am I extending that security program into that cloud computing space? Do I have the same level of visibility? Am I monitoring it in the same way? All of that is thankfully quite doable because there is a marketplace for a lot of interesting services and solutions that can be leveraged in the cloud. So you can get a virtual firewall and put that in front of your application, or virtual WAF (Web App Firewall) and you can get centralized logging and feed it into your SIM (Subscriber Identity Module). So, all of that is possible with the cloud but people need to change the way they are thinking about their security programs so that it’s an extension into that cloud space. That’s the dynamic shift that I think that a lot of people are trying to catch up to.

Mike:

I think you hit on an interesting concept there, Iain. We should delve a little bit further into that. You talked about the marketplace and we are talking about opening up and being within an ecosystem. You mentioned that inherently, the cloud is safe and secure for us, but then what is happening within that cloud and within the opening up of marketplaces? Being able to integrate new services and understanding who you are talking to and where that service actually sits within the regulations and security policies? Did you inadvertently start trading data with someone that is not within the policies and procedures you are looking for? What sort of due diligence do you think we need to start doing on partners?

Iain:

You just hit on I think probably the biggest challenge I would point out in this new economy, this new dynamic. We now almost have endless flexibility in terms of architecture in how we enable things and how we connect things. Portfolio+’s journey has certainly been building out these extensive sets of APIs in order to service all the different functions and needs of many different types of customers in the banking space – both traditional banking and this new open banking dynamic. That API outlook is really what most organizations in the world are doing. So, we are going to trust each other to transact through those APIs. We are going to allow ourselves to send and receive data through them and whatever other functionality we want to enable. And by doing that, we are protecting ourselves in some ways because we are limiting exposure. Your question, though, is how do we know who we can trust? How do we know that the partner that we are transacting with has done a level of due diligence? Currently, the best way is to ask them, and not just say hey, do you guys have a security program in place? It is more detailed and pointed things like, can you explain what your security program looks like? How are you ensuring that you have done due diligence so that if I am to share data with you, if we are going to transact together, if you have some sort of security program, what is my exposure? What is my secondary risk that I become exposed to by partnering with you? And so, this is one of the places that the security industry has not solved for incredibly well yet. We do rely a lot on security questionnaires that we will send out to partners if we intend to transact with them or if we are going to entrust them as a custodian of data on our behalf or vice-versa, we are going to become a custodian of their data. Show me what your security policy is. Show me the last time you had a penetration test conducted. Show me that you do vulnerability scanning on a regular basis. Give me some proof that your standards have been implemented, and that is currently the norm. There are other tool-centric methods that you can get into where you can evaluate somebody’s security posture externally. But should you as a potential partner go and invest in that? Maybe not. I think really it comes down to, whoever you are going to partner with being able to show that due diligence and that they have done a certain level of testing of their own security controls and processes. That is probably the best way to validate that I can recommend today.

Dianne:

Iain and Mike, we’ve been talking about this as a journey. We have used the name here today and I’ve heard it in other circles as well too – you know the journey to the cloud. How appropriate do you think the word journey is when we are talking about this?

Iain: Mike, I will let you go first.

Mike:

It is an incredibly important word because it has never quite done. It is constantly evolving and whereas some of the underlying concepts may not change, the methods and the ability to deliver services are changing constantly within that. So, when you think about our software and where we are going from; a real transformation from what we have on premise software to offer cloud native. How we bring those services forward and then once we get there, where can we evolve the new services for the betterment of our customers, and with that ability to operate again as regulation allows within the open banking world? So it is that constant journey and then with those new requirements and experimentation and transformation we do, comes in the, and how is our security journey really evolving within that? That is why it is kind of very exciting to be working with Iain because we’ve certainly learned a lot working from his company. The first time we went through our API validation testing, and we are about to start another one in the next couple of weeks, we are very excited about. But we are always moving forward, and we are taking a great and wonderful trip.

Iain:

I think Mike really said something that resonates with me there. We are always moving forward on this journey; we are looking forward to the new ways that we enable business that we can engage with a wider audience. We talk about open banking – it is the entire world and I think that is the exciting thing about open banking. We are looking to engage with people who probably do not have access, not necessarily as our sole focus, but we are going to enable banking for people who do not have access to traditional banking or do not consider traditional banking as the way that they would want to or prefer to transact. The possibilities there are essentially endless as we continue to evolve the delivery capabilities and what technology will allow us to extend out to the public that we are going to do business with and the partners that we are going to do business with. The marketplace approach is going to speed that up. So open banking is such an exciting and kind of a green field that we are going to experience. From a security lens, we also look back at the way that we built things and the way we delivered things and we learn from where we did find problems before. We make sure that as we design things for this new cloud-enabled, cloud-centric future, that we are incorporating a lot of those good decisions and learnings that we made previously into the future build. Through a marketplace approach and through certainly a lot of changes in technology, we have been able to introduce a lot of those previous learnings into this cloud-centric future, which is great. In general terms though, when we talk about security and the journey, we always say security is a journey with no destination because as we continue to build and enable different types of technology that extend our approach to business and things like that, the way that we look at it is that the threat landscape grows and grows and grows. The different threat vectors and the actors that we are up against, will evolve and change over time. So that is why what we do is because we want to help people understand like now, where do you stand? What is your true position relative to the threats that we know are out there? How can you make yourself more resilient so that you can be secure in this changing dynamic? And then we re-engage, and we work with you at different points in time as you get further down your journey, and come along to help keep you on the straight and narrow and avoid the worst of those evolving threats that are out there as the environment changes. I think that there are tons of examples of that, that you can look at in the press and big stories lately. The whole ransomware situation has obviously exploded in recent years and it is a major threat factor against most organizations. It is not necessarily going to impact open banking – It is going to impact organizations that are enabling the open banking. That is one example. In the open banking space what we are going to have to be hyper-vigilant about is certainly the proliferation of automated attacks against the services that are being offered. The other day I shared some information with you about the velocity of botnet type attacks against some of these open banking platforms and services. There are a lot of threat actors out there who are building their own automation to try and disrupt these services, or to try and commit fraud against these services. Or, sometimes just to observe these services for purposes that we do not even necessarily understand yet, but probably would lead to fraudulent attempts against customers down the road. You know, they are scraping these websites that are being built-up so that they can create a fake one to try and get a user to login to so that they can get access to accounts and things like that. So that is an example of how the threat vectors are changing and evolving constantly and the journey from a security standpoint is to try and stay ahead of that.

Dianne:

Interesting. You have talked about looking forward and looking backwards and always constantly taking stock of essentially where we are and where we need to be. Your focus has been primarily in the health care industry, but we are talking today about open banking in the financial services industry. Do you see any similarities between the two different industries?

Iain:

Yes, there has been a huge boom in healthcare around telehealth and telemedicine in recent years. Particularly, Covid has helped accelerate that. Healthcare is now being delivered in the community and that has been enabled through technology. Cycura is now owned by a Canadian health technology company, called Well Health Technologies. They have a very similar model to what Portfolio+ is building which is a marketplace for health tech applications. So, they have got this app called Health Approach which is allowing different health technology companies to come and offer that as a marketplace to all the different clinics that Well owns and does business with, and all the different partners that Well has. I see certain similarities in how the evolution of these technologies is starting to allow for different delivery of service. A service that we normally think of, for example is when I am sick, I have to go to my doctor’s office, or I need to go to the hospital. The reality is that a lot of care can be offered in the community or at home via consultation. For example, mental health – there has been a lot of great services and vendors that have come up in that space over recent years who are doing at-home counselling sessions where through a platform you can be connected to a wellness counselor and do a therapy session from the comfort of your home. This is actually very similar to how open banking is opening things up to new customers. It is going to open up to people who maybe were not comfortable going to a physician’s office to seek mental health care, or perhaps couldn’t afford to work with a mental health partner, based on geography or something like that. We now have global access then to these kinds of services. Open banking is going to do the same things – obviously, we are going to have to think about the regulatory and compliance side of these things, but we are going to create a much more interconnected global economy through open banking and that is very exciting.

Mike:

I think to add on to that a little bit, which is important about the similarities in the industries is looking to our evolutionary journey of what has already been seen in other industries. So where can we learn from other industries? But the underlying tenant for both healthcare and banking is privacy and security. Those are journeys that we are both jointly on and learning what are we seeing in the healthcare industry and how it applies to the banking industry and vice versa. They are very similar into how private data is, how secure data is, and what is the security regime around it? So that is where I really see a synergy of learning from each other.

Dianne:

One last question for today. What types of due diligence should anybody coming onto the cloud consider or go through from a security point of view, Iain? What would you recommend?

Iain:

Do not assume that the cloud protects you from anything. Treat it like a utility where you are going to have guaranteed connectivity and such within reasonable certainty. And then treat anything you put onto the cloud as basically something that is constantly going to be under scrutiny and potentially attacked. So, you need to think about any data that you are putting in there – how am I storing it? How am I making sure its safe? Practical things like encrypting data at rest – where you can do that. Designing your applications in such a way so that it is feasible. When you are putting something in the cloud, it is inherently only as secure as how you designed the system, the controls you put around the system, and your ability to monitor those controls and the effectiveness of those controls. That will constantly change as new threat factors evolve. You have to stay on top of that. Scrutinize the provider that you’re putting your data in. Working with one of the big vendors like an IBM or Google or Microsoft Azure or AWS – that is going to be a good place to start. There are more boutique vendors out there, and some of them are just building on top of those existing infrastructures, and some have their own private clouds. Think about and figure out the right vendor for you. In Canada, because we have very strong privacy laws, there are some great boutique private cloud providers as well too. If you have concerns around data residency, and so, in the healthcare space, that’s actually become a fairly burgeoning thing too. So scrutinize where you are going to store the data. Going back to what we said about due diligence, any applications that you’re designing and putting out there, it would behoove you to get a third-party assessment by a good qualified vendor to come in and take a look at something objectively and help you understand where the gaps exist in the business logic and what technical vulnerabilities exist in there, so you can get it up to standard before you put it out in the cloud and it is exposed to all the threat vectors and threat actors out there. Those are the bare minimums, and I would certainly be thinking about regulatory or compliance obligations depending on the type of data that I am putting out there and ensuring that I meet those minimum requirements.

Dianne:

Great. Mike – what are you going to take away from today’s discussion with Iain and best advice or practices we want to take on our Portfolio+ journey to the cloud?

Mike:

I think the best advice is to really be understanding of who you are talking to and what you are getting for that service and how the services are put together. Looking at this, as we move into an ecosystem, it is one thing to play in the ecosystem with our APIs versus living in the ecosystem, which is what we now need to do as well, not just for our product but as a company. Making sure that we have done our diligence around that, and security is a journey as well within that. So, we will do our due diligence, and then we’ll continually do our due diligence to make sure that we’re heading the regulatory, the residency, the regulatory, the compliance pieces and hoping we will have a nice long relationship with Iain to make sure that happens.

Dianne:

Great. So Iain, your artwork behind you has caught my eye today. Is there a story behind that that you would be willing to share today?

Iain:

It is an oil on canvas painting from Hong Kong. It is very special to me because my younger brother, and he and I are inseparable – he went overseas to teach for about a year and a half in Korea. He was fortunate enough to tour around Asia and he did so and this was something he brought home for me when I finally got to see him, after not seeing him for an extended period. Certainly, it was special to me and I wanted to have it framed and it sits in the background of all the Zoom calls I am on every day. I really love it.

Dianne:

Well, it is a beautiful piece, and having talented artists in my family, I can appreciate why you framed it and kept it there – it is lovely. So gentlemen, I really appreciate the time we spent together today, both Iain and Mike. Iain, we have certainly learned a lot, and it’s been a pleasure, as always. Thank you for your time today.

Iain:

Thank you so much for having me.

Dianne:

Thank you everyone for listening to our conversation with Iain Paterson. For more information, please visit our website at portfolioplus.com/podcast. If you have any feedback you can reach us or follow us on LinkedIn or on Twitter at PortfolioPlus19. You can subscribe to our podcast series wherever you listen to your podcasts. You can also add yourself to our mailing list and we will notify you when our next podcast is available. Until next time, all the best everyone and thank you.