Right of Centre publication The Spectator magazine makes an interesting point in the aftermath of the collapse of FTX. The author is a traditional and well-respected Banker who has no truck whatsoever with Crypto currencies however the point he makes is quite valid. Even so I am not sure I agree with him. The basis of his fears is that a complete crypto meltdown would have unknown consequences within the worldwide financial system in which theses fantasy assets exist. He is right but what is better to continue to pursue the make-believe stories for a little while longer or to accept the reality that these assets don’t and never have existed as a store of value. The Financial markets have always had their fair share of spivs and snake oil salesmen and until those idiots who believed the crypto hype understand that what they believed in was the Kings invisible clothes then we are just laying the groundwork for the next Ponzi scheme.
Ratings agency Fitch has decided that two tranches of debt worth $ 2.9 billion issued by a Luxembourg entity on behalf of F1 are rated as “junk” or below the BBB minimum for investment grade paper. The reasoning for this is that China’s zero Covid policy could prevent the sport form returning to China with all that this entails for F1’s finances. A race is indeed scheduled in Shanghai for April next year and nobody is suggesting that the overall financial model of F1 is in any way flawed but such is the problem of dealing with any authoritarian regime that does exactly what it likes without any reference or regards for what others might think, including their own populations. For China substitute, Iran, Russia North Korea etc. etc. China is fundamentally no different. The lesson is an old one. If you sup with the devil then use a long spoon.
I just happened to notice a tombstone in the Telegraph this morning that advertises Bank of Scotland’s Home Loan rates. Apparently if you are one of the unlucky ones to have a variable rather than a fixed rate loan with Bank of Scotland then next month you are going to be stung with a risk premium of 4.45% above the bank’s own base rate. I don’t want to single anyone out as the mortgage market in the UK is a mish mash of “products” some of which make sense and a lot of which don’t. Meanwhile the bean counters who determine these rates just carry on regardless without any reference to whether the risk premium is appropriate. To take a practical example Just supposing a property has a small outstanding variable mortgage of £ 100k outstanding and the value of the property is say £ 800k. In other words there is absolutely no likelihood of there ever being a loan loss. Is the risk premium appropriate? The answer is no. If the mortgage was £ 700k the answer might be yes in today’s market. But we do not price mortgages according to risk. Some intellectual rigour ought to be applied to how we do these things. The way we price and structure mortgage lending in the UK is another thing that holds back growth because it uses blunt instruments like loan to value.
Howard Tolman is a London based well known ex Banker, Entrepreneur, and IT specialist
U.K.-based fraud and financial crime prevention company Featurespace secured funding to help build an AI-powered prototype to fight money laundering and other financial crimes.
The funding comes from both the U.S. and U.K. governments, and is part of an initiative supported by Innovate UK, the U.S. National Science Foundation, and messaging network SWIFT.
Featurespace made its Finovate debut at FinovateEurope in 2016.
Fraud and financial crime prevention specialist Featurespace has secured funding from both the U.S. and U.K. governments to build an AI-powered technology to help financial services institutions – including banks and payment service providers (PSPs) – to detect and stop financial crime. The goal specifically is to enhance the ability of financial institutions to combat cross-border money laundering, application fraud, and APP fraud, in particular. The U.K.-based company, headquartered in Cambridge, will build a prototype, leveraging AI, that will be trained on “sensitive private payments data.” Featurespace will apply federated deep learning to the data, using privacy-enhancing techniques such as k-anonymity and local differential privacy. Organizations will not have to reveal, share, or combine their raw data in the process.
“U.K. and U.S. governments want banks to work together to stop fraud and money laundering,” Featurespace Director of Innovation David Sutton said. “This type of privacy-preserving collaboration AI is a hard problem that no one has yet solved. We are confident we can meet this challenge. We’re the only company in this project that has deployed innovative tech to fight worldwide financial crime – and we have the banking customers to prove it.”
The funding comes courtesy of the privacy enhancing technologies (PETs) Challenge Prize, an effort begun in July by Innovate UK and the U.S. National Science Foundation. The initiative also is supported by bank-owned messaging network SWIFT. Featurespace has been given a deadline of January 24 to build the prototype. Upon completion, if the project is successful, it will be showcased at the second Summit for Democracy to be convened in the U.S. in the first half of 2023.
“A successful outcome of this project is to make money laundering across borders and between banks much more difficult,” Sutton said. “If you make it harder to launder money, you make criminal activities less profitable. This will benefit businesses, society, and consumers.”
Founded in 2008, Featurespace made its Finovate debut at FinovateEurope in 2016. More than 70 direct customers and more than 200,000 institutions ranging from HSBC and Worldpay to fellow Finovate alums like TSYS and Marqeta, rely on Featurespace’s technology to protect themselves against fraud and financial crime. An innovator in the field of fraud prevention, Featurespace has developed technologies like Adaptive Behavioral Analytics and Automated Deep Behavioral Networks to profile both authentic and fraudulent behavior to combat financial crime in real-time. Both technologies are components of Featurespace’s ARIC Risk Hub.
Last week, Featurespace announced a partnership with Railsr to help customers of the embedded finance platform better defend themselves from fraud and financial crime. Per the agreement, Railsr’s fraud teams will be able to leverage card and payment fraud prevention and AML solutions via Featurespace’s ARIC Risk Hub.
“As embedded finance increasingly becomes expected by consumers, making sure they are protected from fraud and financial crime must be expected in equal measure,” Featurespace Chief Commercial Officer Matt Mills said. “Railsr (has) recognized this early and added a critical layer of self-learning technology to ensure their customers get only the best experience.”
One of the first banks to leverage a new secure ID validation process for digital account opening from core provider Jack Henry and AI-powered identity verification platform IDScan.net is $27 billion Simmons Bank. The partnership on Jack Henry’s OpenAnywhereTM platform aims to deliver a frictionless mobile onboarding experience for Jack Henry clients, with ID scanning […]
American Express and digital payment platform Square are teaming up to launch a credit card for Square merchants on the AmEx network. The expanded partnership will better support small businesses by organizing expenses and managing cash flow, according to a release. “Our brands will offer a credit-card product specifically designed for Square sellers, backed by […]
Here is our pick of the 3 most important stablecoin stories during the week.
Stablecoins are the Canary in the Crypto coal mine!
This week we continue to see the shakeout from the FTX implosion and stablecoins point to it continuing for some time yet.
Binance, Crypto.com and OKX suspended deposits in Circle’s (USDC) and Tether’s (USDT) stablecoins based on the Solana blockchain.
Victoria Davis, Crypto.com’s VP of corporate communications, later clarified in an email to Axios, “We have temporarily disabled the ability to withdraw or deposit USDT and USDC via the Solana protocol due to Solana network conditions and the risk posed by the significant role of FTX as a Solana-based stablecoin bridge and trading venue.”
Some alarm bells were raised when the yield on Circle’s Earn product showed zero on versus 0.25% the day earlier.
The change seemed to coincide with Genesis Global‘s crypto lending unit announcing that it would halt customer withdrawals and loan originations, which led to the Winklevoss twins’ exchange Gemini suspending its yield-earning Earn product.
“Circle chose to change the yield from 0.25% yield to 0% before Genesis closed their credit lines,” Busch, the spokesperson for Circle, says. “Circle Yield has historically been driven by demand to borrow in crypto capital markets.”
Meanwhile a JPMorgan report measured investors’ exodus from the crypto ecosystem as shrinkage of the stablecoin market.
The combined market cap of the largest stablecoins reached a peak of $186 billion in May, before the Terra/LUNA collapse, the note said. That compares with less than $30 billion at the start of 2021 and about $5 billion a year before that. Since May, the stablecoin universe has dropped by $41 billion, with just under half of the decline attributed to the demise of Terra.
This outflow of looks small relative to the $165 billion that had entered the crypto market via stablecoin creation in 2020 and 2021, “but it would be difficult here to imagine a sustained recovery in crypto prices without the shrinkage of the stablecoin universe stopping.”
In some positive news, USDA would be the first fully fiat-backed, regulatory-compliant stablecoin in the Cardano ecosystem. The issuance will be partnered with a regulated financial services company based in the United States as the banking partner, ensuring the stablecoin is fully compliant and adheres to regulatory guidelines
Raleigh, N.C.-based First Citizens Bank is leveraging the services of a fintech to offer search personalization and improve the customer experience. The $108 billion bank has a search bar in the middle of its homepage for easy navigation. The search option brings answers to client questions “without clicking a bunch of blue links,” Shane Closser, […]
Community banks and venture capital firms are joining forces through the newly launched BTech Consortium to help smaller financial institutions (FIs) invest in emerging fintech technologies to the tune of $100 million. Through the consortium, banks will collectively invest funds to help power various technology initiatives, Cummings said, noting the current pool sits at […]
Bryce Elliott, executive vice president and chief information officer for wholesale and enterprise payments technology at Truist, joined the speaker faculty for the Bank Automation Summit U.S. 2023and will be part of the panel “Solving data expandability issues through cloud” on Thursday, March 2, at 9:15 a.m. ET.
The panel discussion will dive into the latest in cloud modernization, rules for cloud implementation and implications for core systems.
Elliott previously participated at the recent Bank Automation Summit Fall 2022in Seattle, where he discussed how the $534 billion bank is leveraging cloud capabilities through the adoption of new messaging standards and data analytics.
The Summit brings together U.S.-based industry experts to discuss banking automation and technology topics including how to address legacy core systems, businesses intelligence for banking and automating real-time payment processes.
Truist Financial has launched Truist Trade, a self-directed investing solution that allows clients to open investment accounts and conduct online trading. The $534 billion bank unveiled the offering last week as an addition to its Truist Wealth portfolio, according to a Truist release. There are no minimum account requirements, along with commission-free trades for stocks, […]
Financial institutions (FIs) looking to securely store data amid rising cybersecurity threats and open banking regulations can look to confidential computing, a technology that encrypts sensitive cloud-based data while it’s being processed. Confidential computing is a fairly new technology that performs computations in a hardware-based, trusted execution environment (TEE), according to tech giant Intel Corporation. […]
Business software company Quadient and process automation solutions company Esker have partnered with the French government via a joint subsidiary NCS.
The partnership is designed to help businesses comply with new regulations governing the issuance and receipt of invoices between VAT taxpayers.
Quadient most recently demoed its technology at FinovateEurope 2018 in London.
Business software company Quadient and process automation solutions company Esker have announced a new partnership with the French government. Via their joint subsidiary NCS, Quadient and Esker will help ensure that businesses are able to comply with upcoming French tax regulations, specifically with regard to electronic invoice receipt and transmission.
The new legislation applies to invoices exchanged between VAT taxpayers, mandating that these invoices must be transmitted in either a structured data format (UBL, UNCEFACT CII) or hybrid format (Factur-X). Rollout of the new regulations begins in the summer of 2024 and continues through January 1, 2026. At that point all micro, small, and medium-sized businesses will be expected to comply.
“The widespread implementation of electronic invoicing over the next three years is a major challenge for the four million companies in France,” Quadient Chief Strategy and Product Officer for Intelligent Document Automation Nicolas de Beco said. “As a major player in the electronic document management market for small and medium-sized businesses, we look forward to our continued partnership with Esker, in which we join forces and expertise to offer businesses straightforward and efficient invoicing process automation.”
Beyond ensuring compliance with impending regulatory changes, the partnership between Quadient and Esker will bring a variety of benefits to French businesses. The list of complimentary services ranges from centralized workflow management and business process automation to invoice archiving, payment reconciliation, and reporting. The interoperability of these services with other business platforms and solutions will give French companies greater capacity to improve operations, pursue digital transformation, and enhance their cash management.
“As long-standing partners, our two companies have demonstrated their ability to work together to deliver innovative solutions that benefit thousands of businesses in France today,” Esker COO Emmanuel Olivier said.
Headquartered in Switzerland and founded in 1994, Quadient most recently demoed its technology on the Finovate stage at FinovateEurope 2018. The company’s partnership news with Esker and the French government comes just weeks after Quadient launched its Parcel Pending smart parcel lockers in Ireland to help modernize the residential property market in the country.
According to LexisNexis’ recent True Cost of Fraud Study, which looks at fraud trends in the financial services and lending sectors of the U.S. and Canada, the cost of fraud has grown significantly as the global pandemic has ebbed. The report noted that every dollar of fraud currently costs financial services companies in the U.S. $4.00, up from $3.25 in 2019 and $3.64 in 2020. The picture for lenders is even worse. In fact, the report notes that fraudsters have been especially aggressive in the mortgage lending business, sending mortgage lending fraud costs up by more than 23% since 2020.
The report also highlights the problem of identity: the challenge financial institutions have when it comes to identity verification and the rise of identity fraud as “a significant percent of fraud losses at the point of funds distribution.” Both banks and mortgage lenders surveyed also noted the difficult tasks of enhancing fraud detection while simultaneously keeping the customer experience as friction-free as possible.
Lastly, LexisNexis Risk Solutions Director of Fraud and Identity Christopher Schnieper pointed to the elephant in the room when it comes to fraud-fighting in general: the opposition is tough.
“It is difficult for even the best trained professional to detect the increasingly sophisticated crime occurring in the remote digital channels without the aid of solutions that detect digital behaviors, anomalies, device risk, and synthetic identities,” Schnieper said.
What can we learn from the findings of the LexisNexis team, as well as from other analysts and researchers who have pointed to the growing challenges we face when it comes to fraud and cybercrime in financial services?
Three Key Takeaways from the Current State of Fraudtech
Evolving threats demand continuous innovation
Innovation in fraud fighting is driven significantly by antagonistic competition, a “disloyal opposition” to borrow from the language of political science. The competition in fraudtech is not just between businesses and individuals all working to build better mousetraps. This competitive arena also includes actors whose goal, to extend the metaphor, is to help mice avoid being entrapped in the first place. This makes fraudtech an especially “rubber meets the road” part of fintech in which innovation is more than a way to gain market share, it is an existential requirement.
In a recent Experian webinar sponsored by Finovate, Experian’s Kathleen Peters and Prism Data’s Brian Duke underscored the importance of thinking of fraud “as a business.” And as a business, fraudsters will aggressively seek out new markets of opportunity, focusing particularly on areas where there are new, sizable streams of capital flowing. Think about the amount of fraud that accompanied both the housing boom in the late aughts. Think about the fraud uncovered as part of the unprecedented financial response to an unprecedented global health crisis. Think of what is currently taking place with the various meltdowns in the crypto space. Understanding fraud as a business not only helps fraud fighters better combat criminal activity, it also helps fraud fighters get a sense of where fraudsters might strike next.
Tech-enabled human talent to the forefront
In fraud-fighting, there is no debate on the importance of using technology to enhance and support human talent and insight. While there are some instances in which actual human activity is replaced by technology, much of this replacement is of manual, mundane, or routine tasks that are undesirable as work, and often error-prone compared to automated interventions. On the other side, AI and machine learning give human agents fast, rich data they can leverage alongside their own intellect and experience in the field to make superior judgements compared to technological or human actors alone.
Jody Bhagat, President of Americas at Personetics, used the term “Digital Plus Human” in a Mastermind Keynote at FinovateFall earlier this year. “Digital Plus Human” describes what Bhagat called a “sweet spot” between an all-tech versus all-human approach for midsized banks. This is a worthwhile concept that fraud fighters have embraced. The blending of human intelligence with AI, for example, to suss out bias inadvertently created by allegedly color- or gender-blind algorithms, is one instance of the digital plus human concept at work. Relying on human instinct to ferret out more complex identity challenges highlighted by technical tools is another key component of contemporary fraud fighting strategies.
Innovation in identity is key to better security
Lastly, it is increasingly clear that identity is the key to better security. In some ways, the more we can solve the identity issue, the easier it will be for us to solve and resolve security issues. Part of this lies in understanding identity as an access or action-specific factor, rather than a static representation of an individual in the physical, non-digital world. In other words, the interaction between a user and the user’s mobile device may tell more about the authenticity of the individual than a street address or even a social security number. This helps us understand the specific – and more precise – data requirements needed when it comes to establishing identity in digital contexts.
Here, companies like Trulioo are doing important work in helping financial institutions leverage digital identity to make the onboarding process a better and safer experience for the customer and business alike. Other firms, such as Instnt, are introducing innovations such as continuous identity assurance and portable KYC.
Good news for fintech startups in developing markets! Quona Capital recently announced that it has closed its latest fintech fund, its third, at $332 million. The venture capital firm, which specializes in emerging markets, noted that the amount raised topped its target of $250 million. The new fund, Fund III, will be focused on companies that are developing technologies that expand access to financial services for consumers and businesses in regions ranging from Latin America and India to Southeast Asia, MENA, and Africa.
“Since our earliest days, Quona has been dedicated to expanding the frontiers of financial inclusion – investing with conviction in markets and technology-enabled models improving access and quality of financial services for the masses,” Quona co-founding managing partner Monica Brand Engel said in a statement. “Our prior fund performance, robust pipeline of inclusive fintechs, and growing LP interest in our offerings are ringing endorsements of our view on the prospects of impact-oriented venture investing in emerging markets.”
With aggregate capital of more than $745 million, Fund II is the firm’s third fund since Quona Capital was launched in 2015. Those contributing to the fund as investors include global asset managers, insurance companies, both investment and commercial banks, endowments, foundations, family offices, and more. And while many of the investors in Fund III have invested in Quona Capital funds previously, the new fund did receive capital from 20 new investors, as well.
According to Quona Capital, the startups in its portfolio have served nearly nine million small and medium-sized businesses and over 30 million retail customers. Quona Capital startups have raised nearly $4 billion in capital and generated more than $800 million in revenues. Among these firms are India-based consumer lending company ZestMoney, Southeast Asia-based fintech marketplace ula, and long-time international remittance firm and long-time Finovate alum Azimo – which was acquired by Papaya Global earlier this year.
Here is our look at fintech innovation around the world.
Central and Southern Asia
Indian neobank ZikZuk acquired tax e-filing platform TaxSpanner.
National Bank of Pakistan turned to Finastra to enhance its trade finance operations.
Lentra, a fintech based in India, secured $60 million in Series B funding for its loans-as-a-service business for banks.
Latin America and the Caribbean
AstroPay introduced its Mastercard prepaid card in Brazil.
Mexico-based B2B payments company Mendel raised $60 million in new funding.
Brazil’s Agrolend, which provides credit to the country’s farmers, secured $27 million in Series B funding.
Ant Group introduced its Buy Now, Pay later offering in Hong Kong.
Vietnam-based Sacombank partnered with Temenos to enhance digital banking.
Philippines-based neobank Tonik unveiled its all-digital lending products, Flex Loan and Big Loan.
Nigerian fintech Paga unveiled its Visa-branded card this week.
Pan-African paytech Cellulant secured a Payment Systems Operator license from the National Bank of Uganda
Samsung South Africa launched its digital wallet, Samsung Wallet.
Central and Eastern Europe
Polish fintech Ramp locked in $70 million in Series B funding to build payment rails for cryptocurrency investors.
Co-investment platform for European startups SeedBlink secured licensing from the Romanian Financial Supervisory Authority (ASF).
Genome, an Electronic Money Institution based in Lithuania, partnered with Entrust to simplify digital payments.
Middle East and Northern Africa
UAE-based Wio Bank went live with Mambu’s cloud-native banking platform.
Pyppl, a financial services platform based in the UAE, raised $20 million in Series B funding.
Saudi Arabia’s central bank presented its open banking framework.
One of the areas of fintech that has benefitted significantly from the rise of enabling technologies like AI and machine learning is compliance. From reducing the role of manual labor via automation to streamlining complex processes to make rules easier for companies to follow, both regtech firms and compliance teams alike play a major role in ensuring the fintech innovations we enjoy are safe, do what they say they’ll do, and are as available to as many eligible consumers as possible.
We caught up with Sarah Murray, who leads the Deposit Product Team at Compliance Systems. She talked about the impact technology is having on the field of compliance, and discussed the key challenges that Compliance Systems is helping its 1,800 financial institution clients overcome.
How did you get started in fintech? What has led you to where you are today in your career?
Sarah Murray: Before fintech, I was practicing law in private practice, and I just knew I was ready to be out of the courtroom and do something different with my legal career. I started at Compliance Systems eight years ago as a product specialist and counsel; now I am happy to have led the product team for the last five years. I love my job because no two days are the same. I never thought I would spend some days researching legal topics and reviewing regulations, and other days reviewing code and testing software, but I love the challenge each day brings.
Tell us about the work you do for Compliance Systems.
Murray: I lead our deposit product team at Compliance Systems, which consists of attorneys, business analysts, software developers, and quality control specialists who all work toward the common goal of delivering compliant and innovative products to our 1,800 financial institution clients. I love the mixture of technology with the law and getting to keep my legal hat that I went to school for by delivering compliance solutions through technology to our clients.
What are your thoughts on the way technology is helping companies keep up with the changing regulatory environment?
Murray: Overall, I think it’s the job of technology to streamline and simplify, regardless of which industry we’re talking about. In the case of fintech and regulatory compliance, that means automating repetitive and high-risk compliance processes. It also means demystifying regulations where we can for the benefit of the consumers that those regulations are intended to protect.
Our proprietary research engine tool enables us to provide proactive and update-to-date compliance, and our team is constantly monitoring and tracking what is happening in the legal and regulatory spaces in real-time to ensure we can deliver timely compliance solutions to our clients. Our software provides updates through our cloud-hosted solutions, and our compliance safety net tool also provides interactive features that help our clients complete compliant transactions and provide a better level of customer service.
How has this evolved and how do you see it continuing to evolve leading into 2023?
Murray: The market has evolved through financial institutions rethinking compliance and needing to deliver a solution that meets their customers [and] members where they are: on their phones. We deliver compliance in a way that makes sense in a mobile-first environment and develop content with that in mind. This model isn’t necessarily what financial institutions are used to, but it is what customers [and] members strongly prefer: easily navigable, mobile-friendly content.
Financial institutions are telling us they want a single, streamlined approach for a customer, regardless of the channel (e.g. whether it be in branch or online). So, we’ve created a solution that satisfies the requests of both parties. You can open accounts through the same process as you would in a branch location, but on a mobile device with ease.
What challenges are you hearing in conversations with clients? What technologies are resonating most?
Murray: Our Simplicity Mobile, a mobile-first account opening solution, has been highly successful because it has helped address some of the main pain points for our clients. They communicated that they are looking to have a more streamlined, efficient, and consumer-friendly workflow to open accounts and to reduce friction in that process to avoid abandonment. This solution completed that challenge by offering native HTML content that a financial institution can include within their account opening workflow, and by supporting “click to sign” functionality.
Another challenge we are hearing from clients involves their treasury management solutions. Treasury management operations are a vital component of a bank or credit union’s commercial services, but the content needed to properly document this business can require costly outside counsel or consume internal resources that put a strain on operations. Also, financial institutions are looking for a better, more streamlined way to sign up their customers for their treasury services. They don’t want to have to create and maintain separate contracts for each treasury service and are looking to avoid inundating customers with multiple contracts and documents.
Our delivery model ensures that our clients will always be in compliance and our technology delivers the configurability needed for a treasury management solution, as many aren’t looking for a “one size fits all” fix. Our solution helps minimize operational and compliance risks for our clients while also providing a central hub for all compliance-related updates and content within our solution. Furthermore, our solution offers one master services agreement for treasury services to help improve a customer’s enrollment experience.
Are there any tips you would like to share on providing strong leadership in a male-dominated industry?
Murray: A few tips I have are to be passionate about what you do and work with integrity; work hard to deliver what you say you will do when you say you will do it; don’t be afraid to challenge the status quo and be an advocate for yourself and others. A big thing at Compliance Systems is that we believe in reinvesting in our products based on what we have learned from our clients and the industry. I would say it is important to have that mentality yourself as you grow. Learn from mistakes. Learn from what works. Learn from your colleagues and clients. Together as an industry, we can elevate the banking experience for all.
The importance of customer experience has increased exponentially over the past few years as people bring more aspects of their lives online. This year, more than 65% of Americans are using digital banking as their preferred banking method, according to a May 2022 survey published by Statista. So, what does this mean? Financial institutions must adapt and follow suit by prioritizing a digital customer experience in order to thrive.
With an accelerating shift to a digitized world, customers are increasingly foregoing the traditional bank branches and are instead conducting transactions, depositing checks, opening accounts and more online. There are even some banks that provide an online-only experience, eliminating physical branches entirely.
As the popularity of digital banking rises, financial institutions must consider how they can stand out in a crowded market to not only attract new customers, but also retain old ones with an experience-led approach.
To maintain their competitive edge, banks must prioritize a tech-driven experience for their customers. By implementing enhanced connectivity, security and intelligence across their infrastructure, financial institutions will be able to future-proof their business and improve the customer experience.
1. Cloud-first approach for unified, connected experiences
For the financial services industry, digital transformation calls for end-to-end augmentation of processes, business practices and methodologies for financial service delivery. In fact, some may say it’s essential for financial institutions to take a cloud-first approach to unify the physical and digital worlds. This is due to the fact that greater visibility can be achieved into all aspects of a network, not to mention the physical aspects of a business when IoT and cameras are introduced, providing valuable business insights into customer behaviors.
With those insights, a cloud-first approach then helps businesses iterate faster on new customer experiences and quickly pivot as the behaviors of customers change over time. It also becomes easier to rapidly implement updates to address newly detected cybersecurity threats while prioritizing and securing application experiences, as more and more customers transition to a purely digital banking experience.
One important strength of a cloud-first approach is the ability to scale a business in near real-time to meet customer needs as they happen. Whether it’s adding new branches, features or applications, a cloud network can implement these in minutes without disrupting other operations on the network. Because of this, cloud migration has become a priority.
2. Enhance experiences with machine learning
Customers have a near infinite choice of banking options and expect a secure digital experience every time they make a transaction; they need it to be executed quickly and completed with greater accuracy than ever before. Machine learning has the ability to see how a network is behaving and transform that information into insights and recommendations to make a network run at its best, so customers get the most reliable and consistent experience.
For a financial institution, it takes the guesswork out of optimizing a network to create the most efficient network possible. This not only saves money by making the best use of resources available, but also provides the insights needed to better plan for the future. In many cases, machine learning can be automated for the network to make the recommended changes itself.
Automation can be taken one step further by leveraging APIs to automate many of the manual tasks within a network such as deploying new locations and features, or to gain specialized information regarding how customers use certain banking assets such as ATMs. The point is to provide staff with the ability to accomplish more in less time while gaining the information needed to make intelligent decisions about future network needs.
3. The internet of things powers branch transformation
While many financial institutions may already implement technology-driven aspects into the in-person banking experience, banks on the laggard side of the digital divide are losing customers and managed assets. This has resulted in a tremendous push to bring digital banking to life inside the branch to accommodate evolved banking expectations.
Banks are leveraging Wi-Fi connectivity and the internet of things (IoT) to enhance in-person customer experiences. Upon walking in and signing into the check-in kiosk, customers are transported to a customized app-like experience in the branch.
Bank managers are utilizing heatmaps and people-counting capabilities within cloud-based smart cameras to optimize staffing and reduce queue wait times. Smart cameras outside can optimize the drive-thru experience for customers, keeping track of the number of cars and wait times, and alerting banks when additional staffing is required to speed service and improve the customer experience. Behind the scenes, environmental sensors are monitoring and protecting the critical IT infrastructure powering these outcomes. As physical security is also automatically monitored by the aforementioned cloud-based smart cameras, the bank has become a welcoming and safe environment.
4. SD-WAN network protection
With cybersecurity attacks on the rise, financial institutions are allocating upwards of 10% of IT spend in order to deliver best-in-class security for their stakeholders and customers alike, according to Deloitte. According to the U.S. Federal Reserve, cybersecurity events are one of the top risks to financial stability. As financial institutions are entrusted with sensitive customer information, and the quantified costs of security incidents is high and growing, endpoint and network security becomes even more important.
Endpoint and network security are poised to become the largest components of cybersecurity spend in the industry, having grown in share over the last several years. As such, firms need a converged security and SD-WAN approach that can scale security, performance and resiliency across regions, devices and technologies in the simplest manner—one that leverages the power of the cloud.
A cloud-managed SD-WAN architecture keeps customer and institutional data secure across networks. Cloud-managed SD-WAN also facilitates the commensurate data flow and communication that enables financial services organizations to serve their customers’ rapidly evolving needs. With networks touching more nodes than ever before, it becomes paramount to leverage the cloud in order to manage devices, flows and policies from a common decision-making platform.
Cloud-managed SD-WAN architecture also adds context-specific visibility into operations, employee locations and data flows that help IT leaders act on new insights while continuing to optimize for security, accessibility and performance that help improve employee and customer satisfaction. As financial institutions increasingly advance in their respective digital transformations, they’re also now storing information across regions, devices and storage centers that span on-premises and the public cloud. A cloud-managed SD-WAN architecture enables IT leaders to deploy common security policies across networks in order to thwart cyberattacks and maintain security across both private and public clouds.
Enhancing security both within an organization and at the service edge will require a strong cloud-managed SD-WAN architecture capable of handling increases in connected networks, regions, physical sites, applications and devices. With this in mind, financial institutions will not only stand out from the competition and develop differentiation built on security, but also future-proof their business by building in flexibility and scalability with common, deployable cloud-managed policy.
Juan Vela is the Global Head of Market Strategy at Cisco Meraki.
I can’t say that you read it here first, but I have been consistent within this column in refusing to believe in the crypto currency story. FTX might not actually be the archetypal financial con but a con it most certainly was whether by accident or by design. I discussed the whole thing with a colleague who understands the crypto business better than most and he compared it to Enron? As in most of these stories some innocent people were almost certainly caught up in doing things which were illegal, but they might have not known about it? To me the great lesson to be learned from a huge financial disaster is that the fact that a company is regulated does not save you from being swindled. The EU added credibility as Cyprus granted a license to FTX less than two months ago. To its credit the UK’s FCA warned the UK public against trading with an unlicensed unregulated entity but FTX had been licensed in quite a few respectable locations but that has not helped one iota. The UK only seemed to warn people because FTX was in the Bahamas. The FCA also recently granted a license to Revolut which moved a lot of their trading to Lithuania earlier this year? My colleague told me that the real problem was that an affiliated company Alameda Research was gambling with client’s money. He told me that this was not a research company but a proprietary trading desk and that the traders were “ true believers” in the asset class and were therefore always holding a long position. I told him that was the key shortfall of crypto. By definition you cannot take a short position in something that doesn’t actually exist in any tangible form. Caveat Emptor.
I found this piece quite interesting as it somehow seems to assume that just because you have an interest hedge then everything is hunky dory. Clayton, Dubillier and Rice are Wall street players but no doubt consider themselves to be world players. I don’t know anything about them but I wouldn’t mind betting that thew rationale for acquiring Morrisons in the first place had very little to do with next to zero interest rates. The purchase took place in October of 2021 when conditions were much different to today. This was a leveraged buy out which almost certainly means that the buyers borrowed most of the money in Sterling thereby creating a partial hedge against the capital sum. However, if the leverage was let’s say three times this would have left the buyer with a 25% sterling liability. Since the Russian insanity in Ukraine the American dollar has surged as a safe haven (under Biden?) Just the same I would like to be fly on the wall when CDR’s hedging committee next meets. Hedging has costs and risks attached to it. Nothing comes cheap and whatever else comes out of this deal it doesn’t look like a good deal for the buyer nor for he banks that financed it.
As the UK chancellor takes aim at the British Economy a warning that things are not at all good in the credit markets. Insolvencies of UK companies have risen by nearly 40% year on year. Part of this is due to the support given to the walking dead through artificial COVID support loans, another giant folly mainly caused by the UK Government in the first place. Many of the companies which are in trouble now have been in trouble for ages and would not have survived in a normal interest rate environment anyway but it will prove to be a dire headache for the bankers that will have to pick up the pieces. As I have mentioned many times before the real problem is that there is shortage of people mot just in the UK but worldwide who have the ability to recognise value and to know how to save what is valuable. Britain is the first economy in Europe to have to address this problem but it will be everywhere as soon as the ECB recognises that it cannot go on printing virtual money for ever. That point cannot be far off. The UK has a relatively strong banking system but that does not apply to some other Eurozone economies. Today the ECB warned that the Eurozone faces threats to its financial stability. Yesterday we were told that Japan faces a downturn with economic fundamentals far worse that the UK.
Howard Tolman is a London based well known ex Banker, Entrepreneur and IT specialist
The following is a sponsored blog post from Finastra.
Post-pandemic recoveries stalled by rocketing energy prices are leading to calls for stalling a green transition that has already begun. But the costs to businesses due to climate-related weather events within the next four years will be over $1 trillion.
Investors and financial institutions are increasingly applying non-financial factors (Environmental, Social, and Governance) as part of their analysis process to identify material risks and growth opportunities. Also, there is a high interest coming from consumers in the sustainability of businesses and how they impact the environment.
But because of the broad range of indicators coupled with the lack of standards, transparency, and unified reporting makes it a challenge to assess and measure true, impactful ESG credentials and the sustainability of a business.
At the same time, many banks have started to embrace/experiment in the Metaverse including DBS Bank in partnership with The Sandbox with a focus on driving sustainability. Will this be an opportunity or a challenge for financial institutions keen to demonstrate their commitment to a more sustainable future?
To help navigate these challenges Finastra invited three experts in ESG and Sustainable Finance alongside Christophe Langlois, their Global Marketing Lead, Fintech & Developer Ecosystem at Finastra, who hosted this insightful conversation:
Marcus Cree, MD Financial Technology and Services, GreenPoint Global
Tanuj Pasupuleti, CEO, Bankify
Jay Mukhey, Global Director of ESG, Purpose & Impact, Finastra
They discussed the following topics:
The case of ‘greenwashing’ in 2022 and how to identify it.
The main differences in terms of sustainable finance adoption and challenges between the key regions of the world?
The opportunities that come with sustainable finance.
The essential role open/API banking plays in fostering sustainable finance.
Metaverse from a sustainable finance standpoint.
To learn about the successful adoption of ESG and sustainable finance and what solutions are available right now on the market, watch the video by visiting this page.
Digital banking fintech Amount is now offering financial services solutions through the Mastercard Engage global partner network as the credit card giant enters the open banking space. Through an extended partnership that started nearly a year ago between the fintech and Mastercard Installments, a buy-now-pay-later consumer program, Amount is now supporting Mastercard customers by building […]
San Francisco, California-based digital bank Varo has added popular money transfer solution Zelle to its mobile banking app.
The integration will bring safe and secure money transfer capabilities to Varo’s more than six million accountholders.
Founded in 2015, Varo Bank is the first neobank to offer Zelle to its customers.
All-digital Varo Bank announced this week that it will offer money transfer solution Zelle in its mobile banking app. Varo is the first financial institution of its kind to offer Zelle in its app without having to partner with a bank. A safe way to send and receive money from friends, family, and trusted small businesses, Zelle has more than 150 million current users who access the technology via their banking apps.
“Adding Zelle to our product lineup is our bank charter in action,” Varo Bank founder and CEO Colin Walsh said. “We are excited to welcome millions of Americans to access Varo’s full range of benefits on our modern, secure, digital banking platform that now includes the ability to quickly send and receive money.”
Customers who have made a qualifying direct deposit in the last 31 days are eligible to enroll in Zelle at Varo. Additionally, those customers that have made any Zelle transaction in their Varo Bank account before November 3, 2022 are grandfathered into the program and will also be eligible to enroll in Zelle at Varo.
“Varo Bank customers will now have a way to send money to friends, family, and others they trust, whether they need to pay back a friend for dinner, split the cost of rent with a roommate, or pitch in for a group gift,” Early Warning Services Chief Product Officer Kash Baghaei said. Early Warning Services is the network operator of Zelle.
The addition of Zelle is part of Varo Bank’s effort to reimagine banking by giving customers the tools they need to become financially resilient and enhance their financial well-being. Other examples of these solutions include the company’s Varo Believe, a secured card to help consumers build credit, and Varo Advance, which enables users to borrow up to $100 with no interest and a simple fee based on the amount of the advance that tops out at $5.
“Varo Advance was created to meet the short term credit needs of millions of Americans, and it continues our commitment to provide customers the strongest possible foundation for their financial success, with instant availability and low, transparent pricing,” Walsh said.
Launched in 2015 and headquartered in San Francisco, California ,Varo Bank offers an all-digital alternative for financial services consumers. The institution provides a bank account with no credit check, no minimum balance required, no monthly fees, and no overdraft fees. Accountholders have access to more than 55,000 fee-free, Allpoint ATMs in locations like Target, CVS, and Safeway. Varo Bank cardholders can get up to 6% cashback when they use their Varo Bank debit or Varo Believe card at select brands.
Square is launching a credit card for its small business clients.
The American Express card will be powered by i2c and issued by Celtic Bank.
There is no word yet on a launch date, but Square said that more details will be released next year.
Move over, Brex, Divvy, and Ramp. Square is getting in on the business credit card game. The mobile payments company announced today it is expanding on its existing partnership with American Express to launch a new credit card that will be tailored for Square’s merchant clients.
Square already offers a small suite of banking tools, including checking, savings, and loans, but this is the company’s first ever credit card offering. Adding a credit card to the mix will not only round out Square’s in-house banking options, it will also help it compete in the increasingly profitable business banking arena.
“Small businesses can struggle to find fair and simple solutions for their credit needs. Square has spent years building a successful lending program to eliminate this barrier for sellers, and we’re uniquely positioned to innovate even further in this space to expand access to new types of credit products,” said Square Banking General Manager Luke Voiles. “We wanted to create a product on a payment network that has a strong track record of supporting small merchants, making this card a natural progression of our existing relationship with American Express.”
As with most fintechs that offer a credit card, Square is tapping a third party, i2c, to power the credit card offering, which will be issued by Celtic Bank.
According to Square, the credit card will integrate directly into the company’s banking suite to help businesses manage their cashflow and offer them visibility into their business’ finances. At the moment, there are not many details about the new American Express credit card, including the launch date, rewards benefits, or cost. However, Square said it will provide more information next year.
The only thing surprising about this announcement is how late to the game Square is. Square launched in 2009 when fintech was still in its infancy. The company debuted its lending arm in 2014 and remained relatively quiet until the challenger banking boom last year when it unveiled its savings and checking accounts.
In comparison, one of the largest challengers in the business banking arena, Brex, was founded in 2017. The company launched its business credit card offering in 2018 and was an overnight success. Multiple other new players joined in, including Ramp, Divvy, and Expensify. Perhaps Square plans to rely on its existing customer base to give it a competitive edge against the competition. The company had more than 64 million business clients as of 2020.