Modernizing Legacy Banking Systems with Rich Kiel of Backbase

Our Guest: Rich Kiel, Managing Director of Enterprise Sales for North America at Backbase

Rich Kiel is a seasoned financial technology executive and currently serves as the Managing Director of Enterprise Sales for North America at Backbase. With a distinguished career spanning several prestigious financial institutions, Rich brings a wealth of experience and expertise to his role. In his capacity as Managing Director and Head of Enterprise Sales for the North American region at Backbase, Rich Kiel plays a pivotal role in driving the company’s strategic vision.

Rich’s extensive career includes leadership roles at prominent financial institutions, including KX, UBS Asset Management, Refinitiv/Thomson Reuters, JPMorgan, Merrill Lynch, and Salomon Smith Barney (now Citigroup). Throughout his career, he has consistently demonstrated his ability to foster revenue growth, enhance profitability, expand product and service capabilities, and build highly effective global teams.

With profound expertise in the intricate landscape of global financial markets, Rich Kiel has spearheaded strategic initiatives that drive growth and deliver quantifiable, positive results. His particular strengths lie in the domains of banking technology, electronic trading, risk and portfolio management, as well as data and analytics.

Episode Transcript

Rich Kiel: A few years ago, everything was about the blockchain and distributed ledger technology and how that was going to be transformational. And I’m not saying that there isn’t a useful case for it, but it was more a solution looking for problems, whereas machine learning and AI are already affecting our lives in profound ways and the things that we do every day. I think financial services and banking are a bit slow to catch up from the customer’s perspective or the members’ perspective. And I think we’re just going to see unbelievably fast-paced growth and change.

Jacob Hollabaugh: Welcome to PayPod. The Payments Industry Podcast. Each week, we’ll bring you in-depth conversations with leaders who are shaping the payments and fintech world from payment processing to risk management and from new technology to entirely new payment types. If you want to know what’s happening in the world of fintech and payments, you’re in the right place.

Jacob Hollabaugh: Hello everyone, and welcome to Paypod. I’m your host, Jacob Hollabaugh. And today on the show, we’re going to be discussing the idea of engagement banking and how to go about modernizing legacy banking systems, and where or who the focus of banking should be on. Joining me to discuss the how and whys of this topic is Rich Kiel, managing director of enterprise sales for Backbase, the company leading the way in re-architecting banking around the customer. Rich, welcome to the show. Thank you so much for joining me today.

Rich Kiel: Thanks, Jacob. My pleasure to be here.

Jacob Hollabaugh: Pleasure is all mine. Let’s start here. I use the term engagement banking in the intro there. That might be a term that’s new to some listeners. It was somewhat new to me. It has come up on the show a time or two in recent past, but what does engagement banking mean or what does it mean to you in Backbase at least, and what would the differentiation be between what we would think of as traditional banking and engagement banking?

Rich Kiel: Yeah, it’s a great question. So at Backbase, basically we’re on a mission to re-architect banking around the customer. And on one hand what we refer to as engagement banking is a platform, right? It’s a technology platform that we take to market. But it’s really it’s a digital banking solution that creates seamless banking experiences all from the customer’s perspective. So the shift here is really if you think about traditional banking, the way I look at it is traditional banking is I refer to it as often been inward out, meaning banks have a set of products and services that they’re looking to take to market, that they’re looking to distribute to their customers. And they think about it from how do I apply these products and services to my customer base? Engagement banking is all about the customer experience, and it’s all about thinking about how the customer wants to be served as opposed to it being inward out. It’s more outward in. So it’s actually thinking about that customer’s experience from the beginning. But I think additionally too, if you think about legacy banking, there’s a lot of challenges. So vertical silos, legacy technology, technical debt, slow progress, things like that. This is all about agility. This is all about user experience, it’s seamless journeys, customer-led orchestration. It’s really think anticipating the customer’s needs before the customer asks for something. I think that’s really a big part of the difference.

Jacob Hollabaugh: Absolutely. And how long has this idea been around? I’m sure there’s been different names for a lot of the similar ideas here, but was Backbase kind of the first to coin the term of engagement banking or lumping this all into that term. And how long when do you think this kind of transition or the idea that these types of changes need to happen first came about.

Rich Kiel: Backbase As a company, we just celebrated our 20th anniversary. So on one hand, we feel like we’re an agile early-stage growth company and a lot of that is actually in our DNA and culture. But we’ve been doing this for 20 years now, and I think when we talk about putting the customer first, everybody’s always talked about putting the customer first. I’m not suggesting that they don’t. So that concept has been around as long as banking has been around. But I think the difference is a lot of traditional bank banks have gotten away with providing what I would call an okay level of service. And a lot of that comes it’s deep relationships, especially when you get out into the community and local banks outside of the big massive Tier one banks. But I think what we’re actually seeing here and why engagement banking is becoming much more of a topic of conversation these days is the challenges that banks are facing in terms of servicing their customer base. And this is where we get to what everyone talks about, this generational transfer of wealth and the fact that this incoming generation of customers and consumers and members, if you’re a credit union, they want to be serviced and treated differently than their parents and grandparents.

Rich Kiel: And while that’s not saying that loyalty and relationships aren’t important to them, obviously they’ve grown up in a digital age. They’re used to being fed information and services very, very differently. And I think this is the biggest challenge. This is the biggest opportunity and this is the biggest threat for many of the banks out there that they really have to adapt their customer service model to be able to engage those types of users and keep them sticky and keep them on board as they mature and go through their adult life, whether it be from a retail perspective, wealth management, they own businesses. There’s like I said, part of this transfer of wealth is a huge inheritance, the largest in the history of mankind. A lot of young people are going to be moving into family businesses and other things, and they’ve grown up in a world where everything’s ubiquitous, everything’s at their fingertips. I’ve got kids. They’re used to immediate gratification. What used to take days and weeks needs to be done in minutes to keep these folks on board and happy.

Jacob Hollabaugh: Yeah, absolutely. And I can speak as someone who firmly right in the middle of what we’ve defined as millennials who. The first start having some of the technology and the changes and everything and had a pretty big gap from the generation above mine to mine and what our expectations or how we interacted with the world were. But we were still in the transition point into the digital age. And now the generation below me, as you’re saying, is there’s always been gaps between generations and things that needed to change. But the gap seemingly are getting bigger as it’s defined by the digital and the technological transformation that’s happening right alongside where their lives truly look vastly different than my life. And I’m only 5 to 10 years older and not as vast of a difference as it was mine to the generation above me and so on and so forth. We’ve talked about you started to list backbas there and give some of the history. Can you give us just the general overview of the services that you do offer and who exactly you are working with?

Rich Kiel: Absolutely. So like I said, so 20 years young, global financial technology company, our headquarters are in Amsterdam. We’ve got 14 offices around the world, about 2000 employees. And we’re the backbone of financial services all over the world. Over 50 million users a day are bank customers are actually touching digital technology that comes from Backbase. We offer services across a range of different vertical lines and across business segments focusing on retail banking, focusing on business banking, focusing on wealth management. And in there, we’ve got offerings for digital banking, digital onboarding of customers, digital lending, and loan origination. And then we’ve got other tools that actually are done, are focused on we’ve got a product called Digital Assist, which is actually focused on internal employees to banks. Isn’t just empowering the customer, the end user, or the member. This is also empowering the bank’s employees so that they can also give those end users and members a better experience also. So giving them modern tools in the digital age as well as we’ve got a product called Digital Engage, which is effectively a digital marketing platform because a big part of this and really given that client a better experience, is being able to deliver seamlessly the right information, the right data, the right products and services at the right time. So to give them what becomes a more personalized experience.

Jacob Hollabaugh: And with I hadn’t quite realized in my research the the global scale, I knew it was a global company. But the numbers that you shared there, very impressive. And it begs the question, so you’re working in the North American sector of all of that with a company that is working in the global financial system and in all of these different markets that obviously come with all of their own standards and rules and regulations and everything else, what kind of advantages or power is derived from being able to work in all those markets? Things like I’m thinking of being able if something’s not quite ready for a US market per se, but being able to test it in banks in this area, or if regulations are different in one area than the other, being able to get it out earlier and learn some things. So what kind of other advantages come with being a global system, A global company that’s able to work in all of these different markets? Is there anything you can derive from that that helps you be your best in each of those markets?

Rich Kiel: It’s a great question, and I’ve run global businesses over the course of my kind of 35 years career in financial services market, and it’s not without its challenges. So my focus personally today is I’m the managing director of our enterprise business in North America. The way we define enterprise is banks and credit unions with over 30 billion in assets, which are about 150 named financial institutions in this space, there are about 5000 banks below that, and what we define as mid-market. But to get back to your question, basically what this gives us is an ability to have a diverse set of capabilities that ultimately all get factored into a core product, which we can make available, particularly clients on the smaller end of the spectrum, are really looking for an off the shelf product that we can get to market quickly and we can provide as a hosted managed service on their behalf. White-labeled for them, of course, and whatnot. And the more feature-rich that can become, of course, the more people get out of the box, the quicker you can deploy it. Et cetera. But you make a really, really good point because every market has its local market-specific requirement. So connectivity into payment systems and things like that that we see. And even here, the payments environment in the US is different than the payments environment in Canada, with Interac being the ultimate provider of those types of payment services. So one of the unique differences for backbase versus a lot of the competition in the space is whilst we have productized solutions with that are very feature-rich and quickly deployed. It’s a very open and flexible platform. So our approach and certainly ours in the enterprise space is our clients tend to be builders. They like to do a lot in-house. When I say enterprise. And I mentioned the size. It’s not just the size. It’s really more the characteristics of the financial institution because we do have clients that we service that are just below in the $20 Million range, but they behave like what we would call enterprise, meaning they like to build. There’s a need to personalize. They got a complex text stack, those types of characteristics. So I think that’s where our platform is uniquely different because we partner with our clients for their long-term journey in digital transformation. And it is a journey. We use this phrase progressive modernization because all of our clients or at one, they’re at different points in that journey and they all take they all tend to take different paths. But the beauty of the platform, it’s open and it can be tailored to meet those specific needs of different customers.

Jacob Hollabaugh: Yeah, certainly important. And again, the just the tech age, the digital age that we live in. It’s one thing to get everyone caught up to the current moment, but the current moment stays the current moment for a very, very short amount of time in our world today. So being able to always be flexible and changing to the newest environment is certainly important.

Rich Kiel: And just to close out on that bit, just to be clear to almost like an Amazon-like approach to because I just want to make like that. It’s that last mile of customization. So the way we’re structured globally, product team is central and they focus on the core and then we’ve got capabilities across the region either in-house or with third-party partners that we work closely with to help us effectively with that last mile. I’d call it that last mile journey, which is that kind of local tailoring and customization that’s needed.

Jacob Hollabaugh: Yeah, absolutely. So one of the kind of musk ask questions with fintechs working so closely to offer solutions to banks that I always feel like I have to ask is why not be the bank yourself? What’s the purpose or the philosophy behind having set out to make all of these tools to make banks better instead of ever using them to just be the best bank yourself?

Rich Kiel: Yeah, that’s a good one. Being a bank requires a lot more than most people factor in, right? If you look at it for a number of years now, people have been saying that the banks are under threat from big tech. When is Amazon or Meta or Google any of these guys or Apple? They’re not banks for a reason. They can’t become one. But I think when you factor in the multitude of things that need to be done, not to mention the regulatory scrutiny and just the overall model, I don’t know that it’s conducive for their businesses and for us. We’re a technology provider. We partner with our clients who are banks and credit unions. But yeah, I don’t think our founder ever had any aspirations of us becoming a bank, but I can’t speak for him.

Jacob Hollabaugh: Yeah, well, again, it is a it’s a question I’ve asked a few folks on the podcast in the last year here and yeah, I’ve gotten very similar answers. It’s usually I’ve only had one person who just straight up said because it’s a lot harder and frustrating and this is better and more fun. That said it that plainly, but I love that you bring up because the idea of the big tech companies maybe being a threat to banking is a kind of trend or a hot, buzzy type of topic that we’ve brought up a time or two. And that’s a great way to expel why someone would maybe want to work with banks or on behalf of and make solutions for them like yourself, but not be them, is to say, well, if it was easy enough like it makes perfect sense to just point to like Amazon. If it was easy, Amazon would have just done it already because look how big they are and it makes sense to all of us on a high level that they could just do that, but they don’t. So that’s a great actual response of Yeah, it’s a really it’s a really difficult thing and we’d rather work with the banking partners and provide the services we can provide.

Rich Kiel: Yeah, these guys are capable. Like I’m looking at my I’m sorry to make a plug for Apple. I’ve got my iPhone here. Right. So it’s effectively a supercomputer now compared to what, what existed ten years ago. But why do I always have to replace the glass that breaks? It’s not because Apple can’t make a screen that doesn’t break, Right? They’re more than capable of doing that for whatever reason they choose. Not to. Right. And I think it’s the same thing here.

Jacob Hollabaugh: Yeah, certainly. So another big thing that came up in preparation for the conversation, I was reading a great blog post from your CPO about bank differentiation and which I’ll try to link to that blog post in the show notes for anyone listening that might be interested in reading the full thing. But it led me in reading it to want to ask you about that topic of differentiation. Banking is really crowded and I often ask some of the banking executives we have on the show how they try to stand out, how they do try to differentiate themselves, and the importance of that. So with what you do, how are your solutions able to help those banks do that differentiation piece? How are they able to help those banks differentiate themselves? And how important do you see that as maybe a selling point to the banks and credit unions you’re working with that your products or solutions allow them that differentiation that is important to their customer base?

Rich Kiel: Yeah, it’s a great question. And I think, again, I mean, look, I’ve made. My career built around financial services and banking. So I don’t want to disparage the banking community again. But again, I think banks have gotten away with providing okay service and I think banks have gotten away with basically not a lot of differentiation. So I think some of that comes down to what’s most important certainly for for local and community banks. It’s relationships. So they all provide a core set of features and services. But the fact that your bank or they’re down on the corner, you can see them, you talk to them when you need something that counted for a lot. Right? And that’s what that’s what loyalty meant to that type of customer member or consumer. But I think that what we’re looking at right now when I talked as well before about this kind of generational shift in the next generation of consumers and customers for these institutions, it’s about providing a level of service that’s entirely different. And it’s all about, as I said, it’s about that hyper-personalization or tailoring that to the client. And when I say that, I mean this is really about making them feel like you’re anticipating their needs so that clients are getting personalized financial advice, fed to them, tailored product recommendations, and tailored communications at the right time. They get stuff blasted at them right now. But if I’m a senior citizen, I don’t need a banner asking me about consolidating student loans.

Rich Kiel: And if I’m 14 years old, I’m not interested in an automobile loan. So it’s really about and we’ll talk I think maybe I’m sure we will because you can’t get away from it. But where technology is going to facilitate a lot of this and then even how do you keep the next generation on? It’s about providing innovative tools and services, using all sorts of technology, digital and other things, video around financial wellness and financial understanding, because certainly I think most people and I don’t have stats right in front of me numbers, but I’ve seen many, many stats that basically confirm that most people don’t feel entirely comfortable with their level of financial literacy. Right. And their understanding of financial marketplace. I think young people are much more used to consuming massive volumes of data and do want to be literate. And I think the other big thing, too, that we can help these guys with is this ubiquitous access. A lot of this is about convenience and convenience, and traditional banking was first. It was about having branch offices in the right places. Then it became having ATMs in the right places. Now it’s ubiquitous, right? It’s about helping the bank be everywhere, online, mobile, through social media, TikTok, we’re seeing banks popping up all over the place now. So I think that’s where things are changing, and I think that’s where we can really help them in terms of differentiating themselves with the services that they provide their customers and members.

Jacob Hollabaugh: Yeah, certainly. And I started to chuckle when you referenced earlier in that the location mattering so much before pre kind of digital age and then again at the end there, the convenience of it because I’m from a very small town and I can remember when I was growing up that we went to the bank we went to because it was the closest one to us and that I was confident looking. I’m confident looking back that if you drew a map of ten-year-old me and my hometown, there was five banks. And if you drew a map of the customers of each of those banks, it was literally just the each one was the exact circle around where that bank was. You went to the one that was closest to you and the service was the service that you got there. They all offered the same thing, and the only really thing that mattered was how close you could get to it. And then the next step of that was there was a big bid over who got to have the ATM in like the gym and at the football field for the Friday night games of like which bank in town was going to get the the ATM there. And that mattered to everyone.

Jacob Hollabaugh: And so that convenience has definitely become such a big thing and changed so dramatically in the digital age and the technological age of how that can be offered. And now, as you’re saying, it can be offered in so many ways and so many places, and that is now becoming necessary. You referenced the technological piece there, and that is where I want to turn the end of our conversation here, too. So one final pivot to some news and trends from the year. And before we touch on the kind of tech aspect of it, the first thing I want to ask about is the banking has had a bit of an eventful year, to say the least. Every year in banking and every year in financial world is eventful. But this year, maybe even a little more than normal. We had the big crash early in 2023, which I would still say is probably the standout moment in the financial world of this year. The biggest inflection point, if anything, did that event in the kind of subsequent industry reaction to it teach you or Backbase anything new about the banking industry or change anything about your approach or what you saw happening in the near term future the next 3 to 5 years?

Rich Kiel: Yeah. It’s interesting because. For me, the one of the big eye-openers was not just what happened, but the speed at which the pace at which it was able to happen in. Right. So for those of us that have been around for some time, this is somewhat cyclical. Right? And we’ve seen runs on banks. And quite frankly, they used to take days or in weeks in most cases. This happened in a moment at this point, and a lot of it as well, based on obviously, there’s no shortage of information available to us now. But the accuracy and validity of that information, we have to question it with all of these things. And yeah, I mean, SVB being one signature being another. So that move was swift, happened over the weekend, and at the end of the day, we can debate maybe in another forum the wise right? Because obviously a lot of their growth had come in on the back of banking, a lot of the crypto platforms, and crypto shops. And obviously, there was a there’s continues to be a great concern, you know, from government and whatnot about the threat, potentially threat of crypto. I don’t want to say it’s just a threat, but I think some of that fear, uncertainty, and doubt caused them to move more quickly than they may have otherwise with SVB. But I think what it certainly brought to light is that safety is paramount right at the end of the day. And I think this is still somebody these are somebody’s assets that we’re talking about. And people need to feel safe and comfortable, which is why we’ve already seen some people go. They’ve gone one of two ways.

Rich Kiel: They’ve maybe moved assets to some of the bigger global banks who they think might be safer or they’ve gotten closer to the community bank that you touched on before. And I think actually wanted to make one point in our previous conversation about that part was this isn’t just about the robots taking over. Relationships really are important. And we all know in time of crisis, that’s when relationships are actually most important. So it’s definitely not a one-or-other type of thing. I think there’s room for both and there’s a necessary place for both. One of the things that we’re seeing on the back of it now, of course, is is increased M&A with the banks. Right. I think they’re all looking at where they stand, their own risk profile. And we’re now seeing we saw Pac-west and Bank of California merge. We just saw announcement today of Eastern Bank and I think it was Cambridge Trust looking to merging. So I think we’re going to continue to see more activity like that in the space. And for us, it plays really well into what we do because I think what that’s creating is more complexity from a technology perspective, multiple back-end systems being brought together and the more complex that becomes, the more difficult it becomes to provide those seamless customer experiences that we talked about. The beauty about what we do is we effectively remove a lot of the friction between the internal bank systems and the customer experience. So for us, yeah, we’re pretty optimistic that whilst we don’t want to see fewer banks out there, this is creating more opportunity for the types of solutions that we provide.

Jacob Hollabaugh: Yeah, love that positive approach to it, that it’s opportunity. If anything else. The final question then for you off of that and off your reference earlier to tech being the main driver of everything right now, data is the biggest word that comes up on this podcast at this point. And then we’ve all year I’ve been continuing to make the running joke of needing to ask about AI and machine learning and that those are the talk of the town, the talk of all industries in 2023. But data and these new technologies together are the name of the game right now in banking and financial services. And it really across again all industries. How much is Backbase leveraging data analysis right now and what role do you see, generally speaking, data and new technologies like an AI or machine learning playing in the future of your company, but really in the future of banking?

Rich Kiel: Yeah, it’s at a pivotal moment. We’ve seen tech fads come and go. A few years ago everything was about the blockchain and distributed ledger technology and how that was going to be transformational. And I’m not saying that there isn’t a useful case for it, but it was more a solution looking for problems, whereas machine learning and AI are already affecting our lives in profound ways and the things that we do every day. I think financial services and banking are a bit slow to catch up from the customer’s perspective or the members’ expect of. And I think we’re just going to see unbelievably fast-paced growth and change to do the things that we just talked about in terms of providing those seamless, tailored customer experiences. It’s all about the consumption of mass quantities of data. It’s not structured data. It’s often unstructured data. So normalizing that is difficult. And then mining that for the intelligent insights that you need to serve them, the information and the data that they need. Let’s be honest, that can only really be done systematically by machines. Humans can’t. We’re just not capable of processing things. In that way. So look better than I do a year ago. I don’t think you could look at a CEO of any bank in the country and generative. I would have been on there. Something that they would have been talking about as a priority. Might have been on the radar out there. Certainly. Don’t get me wrong, the bigger banks, the tier ones, they’ve been using AI and machine learning for a number of years right now. And it’s already it’s already becoming more of a standardized part of their fabric. But I say most of the banks out there at best just beginning that when I said a year ago, not one CEO would have been talking about it.

Rich Kiel: If you fast forward to today, I can’t imagine there’s a bank CEO that’s not talking about how AI is going to change the way they service their customers going forward. So this is one thing that, like I’ll call it now, this is not a fad, right? We’re all we’re already seeing the transformational change that it’s having. And if only if anything else, it’s only going to speed up for us. We partner with our banks in this area, so we work closely with them to help them through the process. Some of it is about enriching our product and then some of it is just about generating, working a lot of work with other third parties and other fintechs, and to leverage the best of breed of of capabilities as well. Microsoft is a big partner of ours. Just as an example, obviously, Microsoft has a huge focus on generative AI. We have a relationship with them that starts with innovation and it’s not innovation just for innovation sake. It’s leveraging somebody like them with the with the depth and breadth that they have and then taking a lot of their work and enriching our product with it. So things like automated chatbots and other things, other all the things that you need to provide that enriched client experience. So again, super early days, we’re not working exclusively with them, meaning only them. Of course, there are so many players out there, but at the end of the day, it’s really closely aligning ourselves with our clients to help them better serve the customers using this type of technology.

Jacob Hollabaugh: Yeah, fascinating stuff. Well, Rich, this has been a real pleasure. For those listening who may want to follow you or learn more about Backbase, keep up with everything you and the company have going on. Where would be the best place for them to go to do so?

Rich Kiel: Uh, Backbase Calm, I would say is the best place your website or. Yeah. From there there’s links to to members of our team sales organization around the world. So yeah, for the folks here. Yeah. Want to just say thank you, Jacob, really appreciate the time. And this was a lot of fun. Yeah.

Jacob Hollabaugh: Thanks to you. We’ll link to that and more in the show notes and again to the article or two I referenced throughout the conversation. Everything will be down there. So Rich, thanks so much for the time and knowledge. Greatly enjoyed it and hope to speak again sometime soon.

Rich Kiel: Thank you.

Jacob Hollabaugh: If you enjoyed this episode and want to hear more, head on over to soarpay.com/podcast to subscribe on your podcast listening platform of choice. That’s soarpa y.com/podcast.