As the banking industry faces ongoing pressure to keep pace with the growing FinTech market, FStech news editor Alexandra Leonards speaks with Lee McNabb, head of group payments strategy at NatWest to explore how the bank is driving payments modernisation as part of its compliance approach.

The emergence of FinTech challengers has completely changed the nature of the banking industry. From lending and money management to payments, incumbents are facing stiff competition from all angles.

Disruption historically has been a good thing for traditional financial institutions, sometimes hundreds of years old. Newer players in the market drive innovation across the sector and ultimately force the established banks to find better ways to serve their increasingly tech-savvy customers.

But given their position as systemically important to the financial ecosystem, balancing this desire for modernisation with their responsibility to maintain and improve upon stringent regulatory measures can be tricky – particularly when it comes to areas as important as payments.

One major British retail and commercial bank attempting to merge its approach to payments innovation with its compliance duties is NatWest. With the bank well on its way back towards private ownership, adopting new technologies is crucial to its long-term growth.

Fierce competition

Lee McNabb, head of group payments strategy says that it’s not just FinTech driving the experience people now expect in payments, explaining that BigTech platforms in the non-banking ecosystem – like Uber and Google Maps – are also influencing expectations in the space.

“That seamless movement of payments and assets is just vitally important,” he explains. “So, we as a bank are competing.

“If there’s 10 parts of the value chain, we’re almost trying to invest in competing across all 10. The FinTechs and BigTech companies might only be in one or two, but they are pivotal in driving that experience.”

McNabb, a former Co-Operative Bank veteran who has been with the former Royal Bank of Scotland since 2018, says that identifying how to compete with a company that has a similar level of investment but is only focussing on one area – while the bank competes across all 10 – is challenging.

Even more of challenge is trying to compete whilst also making sure the process remains safe and secure.

“Because ultimately we are systemically important; if something was to go down in our infrastructure, then there'd be some real issues here in the UK,” continues McNabb.

Staying compliant

NatWest faces several key challenges as it moves forward. The bank must modernise its systems, maintain regulatory compliance, and ensure uninterrupted financial operations, all while meeting customer needs during infrastructure upgrades.

“The complexity that brings from a resource and capacity and investment perspective is a challenge,” he adds. “But then it’s about that balance is well: how do you continue to grow at the same time?

“How do you focus on improving capabilities when actually a lot of your people are locked on that compliance delivery, or your platforms can't necessarily be touched because they're going to be migrated to a new one?”

He identifies ISO 20022 as a major focus for the bank, with the standard poised to revolutionise how financial messages are exchanged globally.

“What we're doing is almost modernising through that compliance,” explains McNabb. “So, we're taking semi-legacy infrastructure for core payments that still facilitates that volume and value, but trying to modernise as we go through the compliance map.”

Throughout this process, his team evaluates various aspects, such as identifying platforms for decommissioning or assessing whether a cloud-first approach is most suitable.

“We’re identifying if we can wrap that API around so that effectively all of our internal customers can integrate simply, but also [simultaneously], external customers can potentially integrate to make it a ‘payment as a business’ type construct,” continues McNabb.

Partnership

Whilst it’s important for the bank to compete with the FinTechs and BigTech firms of the world, these companies also open up partnership opportunities for the sector.

“If you open a bank account with NatWest and you have a card issue, you’ve probably gone through four, five, or even six FinTechs that you don’t realise, One will help with the card issuance, one with help with the onboarding from a security perspective,” says McNabb. “We can’t just do it on our own; gone are the days when banks used to say that they would build everything themselves because they are the main players that know what they are doing.”

It's no easy feat balancing compliance with innovation, but banks like NatWest must continue to keep up with the new players in the market and collaborate where possible to stay relevant for their customers and meet their ever-changing expectations.

FStech’s Payments Awards, taking place at the London Marriott Grosvenor Square on 14 November, recognise and celebrate companies which have demonstrated excellence and innovation in the payments space. Enter now.

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