‘Our aim is to dramatically decrease the cost of IT’

TagPay is a French fintech focusing on both the front and back ends of
organisations. Their next-generation platform is used by banks, telecom operators, and other players to offer digital financial services to their clients. As of 2021, over 30 digital financial service providers use the TagPay system. We spoke with its Chairman and Co-founder, Yves Eonnet.

What role does TagPay play in digital banking?

I created TagPay nearly 15 years ago but we’ve been in the banking industry for the last 10 years. The banking business has been using, and I would say has been completely dependent on technology for many years, but technology is changing and therefore the banks have to adapt. 

It’s what we call digitalisation. Digitalisation is not just technology but technology as a means, technology as a way to progress; but the technology also has users and customers whose behaviours are changing and banks must adapt to this new world.

What we are speaking about here is a new generation of bank, a new generation of banking platform, a new generation of core banking systems with software and IT technology that is managing the bank – and this is what we do.

What technological solutions do you offer?

The main part of our technology is the back end. It’s what we call account management, transaction management, regulatory constraints, KYC, managing loans and savings, everything that you need and everything that you have to do with a bank. 

Our expertise goes further than just the back end though. We also provide all the front end to our customers, which means the apps, the apps for the consumer, the apps for the teller, for the agent and also the access to a website that will allow the bank to deliver its service through all the channels.

So if I’m a CEO of bank today, how should I be thinking about technology and digitalisation? How much budget should I be allocating to this particular function?

I’m going to answer this indirectly. Because of legacy IT issues, banks are generally spending 15% and sometimes up to 20% of revenue on IT. This is far too much. The goal is to decrease dramatically the cost of IT. 

One of the big issues that banks are facing, I’m speaking globally not specifically about Africa, is that many of the services – accounts, cards, payments – should be free. So the cost of servicing each client needs to be minimal. 

It requires a complete redesign of the banking business model. When you speak about the amount of money spent on IT, my immediate reaction is that whatever it is, just divide it by three, five or sometimes 10; and digitalise your offering. 

If I’m the Chief Technology Officer, how should I be thinking about my strategy?

Digitalisation is not about getting rid of the past. The IT systems exist, they work, there is no specific urgency to change so the logic is to design alternative plans as you develop new services. They can run next to the old IT system, which will be serving specific services. Things can be done incrementally. 

But if you’re speaking of processes, then yes, the complete process of the bank has to be redesigned. The digital bank is a bank that is 100% automated, meaning there is no need for human intervention. 

The bank is run by a system, a process, and this system alerts the bankers or the different management teams of the bank each time that there is a need for action or human intervention. It is a completely new way to manage a bank and this is how you reduce costs.

But will algorithms come out with the right outcome; there are stories saying that these can be biased?

For me, digitalisation means humanisation. I think there is nothing less human today than the existing banks. The banks that we have today are very far from us – and the idea is that technology will again create the banker’s role, the banker is going to be someone who is going to use tools and technology in order to serve you better.

Let me emphasise and focus on the algorithm. Of course, algorithms can be biased, and algorithms are not perfect, but algorithms are tools, they are not brains, they are tools and they are tools to be used by humans and the bankers who use these tools seek keen judgement. Of course, they are going to be influenced but everything is influenced by judgement. 

Tell us about your operation in Mauritania.

The BMCI bank in Mauritania decided strategically to launch a new bank next to the existing bank in order to serve a larger segment of the population. They wanted to leverage mobile technology to accelerate financial inclusion. We had to connect their infrastructure and our platform and unlocked a range of services whilst still adhering to the regulatory requirements in terms of KYC and ID verification. 

What happened in Mauritania was very interesting. This was in March last year, the beginning of the Covid crisis. We could not fly and we could not see each other. We managed to install their platform and train their personnel remotely. Our services are cloud-based, and that’s the beauty of it. And, actually in terms of execution, we saved a lot on travel and other expenses. 

As technology becomes more important, should the technological function be outsourced or should it be in-house? 

This varies depending on the bank. With BMCI, they wanted a turnkey solution that was up and running, having to do minimum development internally. Some of the banks will want a much more customised system, and will be interested in developing their own front, their own back end. TagPay is very efficient and has been specifically designed with all the users in mind. If they want to make something specific they can but it’s going to take them some time and some expertise.

African bankers are extremely lucky; they have an incredible opportunity. Today they have a banking system that works but this banking system only supports 10, 20, 30% of the population. 

There is a massive market that needs to be captured – this emerging middle class who are digitally connected that will be looking for loans, looking at savings, insurance. They need tools to manage their businesses and those people are asking for new technology from banks. This is an incredible opportunity for banks. 

People often worry about security issues in cloud-based solutions.

There is no such thing as absolute security. The level of security in the cloud is higher than the security on premises. There is no doubt about that. When we speak about the cloud, we are talking about the most advanced knowledge in order to secure the platform that we host the operations in. It is not possible for individual banks to have this type of expertise locally.

The other point is scalability. The cloud is designed in order to grow with the market, therefore there is no risk of having a limit on the size of the servers and the operation – and this is critical for banks. Above everything, the cloud technology allows us to have continuous delivery and continuous updates on new releases. 

There are some countries like Tunisia, Egypt, DRC that require the data to remain within the country, which is completely legitimate – and we can work with any type of hosting services in any location. Today we are hosting our platforms in France, with a company called OVH, but we are also working with local hosts, such as in Tunisia.

How do you manage innovation?

TagPay is an innovative company. We have about 20 patents and we are interested in understanding how we can progress constantly using technology and developing our expertise. But the most important area is the innovation inside the banks. What we believe is that the platform that a bank is using should be capable of managing any type of innovation. 

By definition we have no idea what things are going to look like in five, six, 10 years, but the platform needs to be robust and adaptable. 

How should banks be thinking about innovation?

I think innovation in the bank should be as much about understanding the technology as developing the business and the services they offer, adjusting to the market and client needs. It’s about problem solving and providing new, convenient solutions. Technology alone has no value, it is just a tool. What is beautiful about digital technology, however, is that it can be adapted to help you as a bank provide a better service and grow whilst enabling and allowing innovation.  

TagPay was the Technology Sponsor of the 2021 African Banker Awards.