MSU Financial Credit Union plans automation expansion through chatbot

The MSU Financial Credit Union (MSUFCU) launched an artificial intelligence (AI)-powered external chatbot this year, but already the $6.6 billion credit union is planning to expand its chatbot automations in 2022. MSUFCU continues to build its chatbots — Fran for customers and Gene for employees — but it will give them a boost with back-end […]

How businesses can use virtual cards to fight AP fraud and boost efficiency

Why virtual cards matter: The cost of accounts payable (AP) fraud can be high for businesses. Nearly one in four companies report a payment fraud attack each year, according to Ardent Partners.  Alternative payment tools such as virtual cards — issued for one-time use, for specific invoice amounts that expire after 30 days — are one of the tools AP teams use […]

Listen: Finastra’s head of cloud, core and digital talks banking strategy

Banks should look to expand their product portfolios and incorporate more services such as payments while embracing new technology, including blockchain, to increase customer retention. In this week’s episode of “The Buzz” podcast, Anand Subbaraman, Finastra’s senior vice president and general manager of cloud, core and digital banking discusses with Bank Automation News three strategies […]

Neobanks, fintechs up the ante on gig economy, microbusiness services

The opportunity is ripe for neobanks and fintechs offering targeted services for gig workers, freelancers and microbusinesses, a labor market that has spiked in number since the onset of the COVID-19 pandemic. Despite that growth, freelancers, independent workers and microbusinesses — defined as businesses with typically one or two but fewer than 10 employees — […]

KeyBank acquires fintech XUP Payments to streamline automation, embedded banking

KeyBank has acquired fintech XUP Payments and will use the B2B digital payments platform to expand its embedded banking strategy and streamline automation, the bank announced Monday. The $187 billion bank did not disclose financial details of the deal, which closed Nov. 19. XUP earlier this year raised $3 million over one funding round led […]

OCC: Banks must prove they can manage stablecoin, crypto risk

The Office of the Comptroller of the Currency today published a legal interpretation of letters issued in July and October 2020, and January 2021 to clarify that a bank may legally engage in certain cryptocurrency, distributed ledger and stablecoin activities, if it can demonstrate to the supervisory office this can be done in a “safe […]

Crypto oversight road map is set by U.S. banking regulators

U.S. banking agencies have issued a to-do list of their plans to tackle oversight of the cryptocurrency industry next year.

Photographer: Samuel Corum/Bloomberg Mercury

In an agenda released on Tuesday, the Federal Reserve and other regulators outlined what issues they plan to focus on as they consider rules for how banks interact with cryptocurrencies. Their priorities include weighing custody, crypto-backed loans and the possibility of capital standards, according to a joint statement.

“Throughout 2022, the agencies plan to provide greater clarity on whether certain activities related to crypto-assets conducted by banking organizations are legally permissible,” the Fed, Office of the Comptroller of the Currency and Federal Deposit Insurance Corp. said in the statement.

While the announcement doesn’t affect any current regulations, the topics officials said they want to clarify could shape how the agencies ultimately regulate the way banks use crypto. Their “crypto-asset road map” overlaps with moves the OCC made in 2020 to open up banking to digital coins when Brian Brooks was in charge of the agency, though current Acting Comptroller Michael Hsu paused those efforts.

After concluding what they called a “crypto sprint” to study how agencies were approaching crypto, the banking regulators settled on several areas they need to clarify. Those issues include how banks should properly maintain custody of crypto assets, what firms should do to help consumers make transactions, how stablecoins should be issued and what capital and liquidity standards should be for lenders’ crypto holdings.

New rules could become particularly important as officials consider ways to regulate tokens more like bank assets. The President’s Working Group on Financial Markets wants Congress to take up legislation requiring that stablecoins only be issued by regulated banks. The group of agency heads has also called for government overseers to assess whether tokens pose risks to the wider financial system.

Still, it’s uncertain whether the three bank agencies will be able to agree on anything in the near term. The OCC is still awaiting the confirmation of a permanent leader, and the Biden administration hasn’t yet nominated a vice chairman to run the Fed’s supervision work. Meanwhile, the FDIC is still run by a Trump administration appointee, Jelena McWilliams.

— By Jesse Hamilton

Critical steps to successful bot governance

When organizations begin using software robots, or bots, their governance is not always a priority. This lack of attention to governance can lead to a host of issues: For example, there could be no alert when a bot stops working, or notification when it completes its work, as well as potential security and compliance issues, […]

Citi to hire 100 people in push into digital assets

Citigroup Inc. is looking to hire 100 people as part of a new push into digital assets inside its institutional business, according to a person familiar with the matter.

Photographer: David Paul Morris/Bloomberg Mercury

As part of the effort, the firm tapped Puneet Singhvi to be its new head of digital assets inside the institutional-clients group, according to a memo to staff seen by Bloomberg News. He will report to Emily Turner, who oversees business development for the broader group.

“We are focused on assessing the needs of our clients in the digital-asset space,” Citigroup said in an emailed statement. “Prior to offering any products and services, we are studying these markets, as well as the evolving regulatory landscape and associated risks in order to meet our own regulatory frameworks and supervisory expectations.”

Citigroup’s latest hiring push comes as the country’s biggest banks increasingly look for ways to expand into the wild world of cryptocurrencies. Bank of America Corp. created a cryptocurrency research team earlier this year, while JPMorgan Chase & Co. and Goldman Sachs Group Inc. have begun offering crypto-futures trading.

Singhvi’s team will provide expertise and outline a strategy for how the different businesses inside Citigroup’s institutional-clients group — which includes trading, securities services, investment banking and its treasury and trade solutions arm — will use blockchain and digital assets.

“We believe in the potential of blockchain and digital assets including the benefits of efficiency, instant processing, fractionalization, programmability and transparency,” Turner said in the memo to staff. “Puneet and team will focus on engaging with key internal and external stakeholders including clients, startups and regulators.”

Singhvi is joining Turner’s business-development team from Citigroup’s trading business, where he was head of blockchain and digital assets. In that role, he led many of Citigroup’s first steps in the space and oversaw the firm’s relationships with major financial-infrastructure providers.

Shobhit Maini and Vasant Viswanathan will now be co-heads of blockchain and digital assets for the firm’s global-markets business, reporting to Biswarup Chatterjee, head of innovation for that business.

The institutional division’s “digital asset efforts are a continuation of our work with blockchain, and are consistent with our strategy to research emerging technologies, collaborate with partners to develop solutions and implement new capabilities enabled by robust governance and controls,” Turner said.

— By Jenny Surane (Bloomberg Mercury)

Deals & Dollars: Crypto conglomerate raises $600M credit facility

Digital Currency Group is fundraising again, this time completing a debt capital raise that provided a credit facility of up to $600 million. The venture capital firm owns some of the biggest players in cryptocurrency, including Grayscale Investments, a large digital asset manager with about $55 billion in assets under management; Foundry, a financing and […]

Listen: Weekly Wrap discussion on how Temenos is accelerating innovation

In this week’s “Weekly Wrap” podcast, the Bank Automation News team discusses the latest news from core and digital banking solutions provider Temenos’ SCALE developer conference, where the company showcased how it is fostering innovation and bringing new fintech ideas to market faster.

In a similar vein, the team addresses the newly available Microsoft Cloud for Financial Services and how MS partners are integrating their solutions — including building on top of Microsoft cloud computing power and software to enhance and expand their offerings. Finally, BAN explores some of the latest financial crime trends in markets and the broader financial services ecosystem, as seen by global market solutions provider Nasdaq.

Find a discussion of these topics and more in today’s episode of the “Weekly Wrap” with BAN Deputy Editor Loraine Lawson and Associate Editor Aaron Marsh for the week ended Nov. 19, 2021.

The following is a transcript generated by AI technology that has been lightly edited but still contains errors.

Loraine Lawson
Hi, everyone, I’m deputy editor Loraine Lawson, and welcome to The Buzz from Bank Automation News, where we explore how automation technology is transforming the banking industry. This is our weekly wrap for what’s happening in the industry this week. And before beginning I’d like to give a big thanks to BAN sponsors and advertisers, Glia and Volante. Thank you so much for your support. I’m pleased to be joined by Associate Editor Aaron Marsh. It is November 19, and here are the biggest news items from our editorial team this week.Temenos held its developer conference SCALE. They announced a new sandbox that would allow new capabilities for developers. They also discussed three innovative use cases that we covered in our new story. But they also launched two of those exchange which Martin Bailey Director of Innovation and ecosystem called a new expanded comprehensive, Temenos Ecosystem. And it builds on their Amazon US marketplace for partnering fintechs Now, what this means is that Temenos is offering more support for beginning fintechs they will actually reinvest 20% of their exchange revenues into their fintech innovation program.And that doesn’t mean that they’re slacking on support. However, Martin Bailey said that all the providers are pre integrated, and cloud ready. So what this will do is it’ll give banks that want to be a little more cutting edge the opportunity to partner with these fintechs and use their solution with their core. But if you are risk-averse, then you will be able to deal with more established fintechs. So Aaron, you reported on Backbase, this new data lake and its partnership with Microsoft, that’s another company with a big cloud ecosystem. Can you talk a little about that?Aaron Marsh
Yeah, sure, Loraine. So once again, you hit on it, this is we’re talking about a very powerful core, cloud-based technology that that has quite a bit of versatility there. What we saw earlier in the month when this went to like general availability, is that there is a number of these partners who are offering like deeper integrations with the with the Microsoft Cloud. So it’s going to be easier, you know, to add and implement their technologies for those who adopt the Microsoft Cloud for Financial Services.But what we’re seeing is some of these partners are sort of taking an additional step. They’re tapping the artificial intelligence and computing strength of the Microsoft Cloud, and Microsoft software like Teams, certainly Azura as part of this as well, but they’re using the strengths of the Microsoft Cloud and software to then enhance some of their own capability. So we’re seeing with Backbase has now got like a data lake capability and functionality that they’re offering as part of their as part of their solution. And that builds off of the Microsoft cloud’s computing and artificial intelligence strength.Loraine Lawson
It’s going to be interesting to watch, because a lot of the big players now Google, Microsoft, and Amazon are offering solutions just for financial institutions. So it’ll be interesting to see how the cores align with that and whether or not it’ll end up being a sort of team sport, where if you’re with Microsoft, you’re with, I don’t know, Finastra are one of the cores. So that’ll be interesting to watch.I did read in your story that Vice President and Global Head of Business Consulting at Infosys Finacle said one reason companies are moving to cloud because it reduces the cost of operations by shifting capital expenses to operating expenses. I did find that interesting because other in other industries, they have found that those costs start to escalate once you’re onboard. And so some companies are starting to adopt what they call a chief cloud officer to manage those costs.It reminds me of when I first subscribed to Netflix when I was paying eight bucks, and now I’m paying the 18 bucks, which is sort of the cost of the cable that I replaced with Netflix. So that could be something to watch moving forward. You also recorded this week on trends in fraud. Now this year ransomware has been the big cybersecurity story. What does the Nasdaq Head of Global anti financial crime say are the emerging trends?

Aaron Marsh
We’re very privileged to have had a conversation with Valerie Bannert-Thurner, right. As you mentioned, she’s the global, head of their global anti-financial crimes technology and business. And, you know, I’d like to preface that one of the reasons you talk about AML so much is that this is an area where there’s so much to be gained right now. To sort of frame the conversation, the United Nations estimates, there’s something like, you know, between two and four or $4.4 trillion laundered in US dollars equivalent, laundered throughout the global financial system every year. Now, okay, so it’s a pretty big amount of money. And then for the good guys, 1% or less of that, perhaps much less like 0.1%, is actually detected. So this is actually an area where we can say, pretty much, the bad guys get away with it almost all the time. And crime pays. So it’s, so here’s an area where we’ve really got to make some improvements.

So Valerie and I, we talked about some of the things that make it difficult. And she’s, as you mentioned, she’s pointing out some trends. One of the things going on, and people don’t necessarily think about this, but the bad players in this space, those who are looking to launder money, are getting very technologically sophisticated. They’re investing, you know, their proceeds in very complex systems. And they’re moving money across borders, sometimes multiple borders, through multiple companies, and through many wallets, so it’s very difficult to trace, it’s very difficult to follow this, it’s hard to find.

But as part of the good news that I heard from Valerie, there are some things that are improving prospects of finding this money that’s laundered, and some of it is, you know, artificial intelligence and machine learning are being applied to increase the effectiveness of AML software and systems. So to give you an idea, usually, what you have to deal with as a bank is just like a ton of red flags, as potential transactions that could be questionable, and you have to kind of sift through many of these, you know, manually, and it’s just very tedious. So AI and ML are being used not only to help sort through all the red flags that you get, but also reduce the number of false positives that you get. So we’re trying to kind of hone in and get get people to look at, you know, only the stuff that matters.

The other thing that she mentioned to me, and she even called this the big one this year. So in terms of what we should be looking for, cryptocurrency and the underlying blockchain technology that underpins cryptocurrency have seen like massive usage spikes, massive investment this year. And that presents a number of a number of very particular challenges. First of all, you have anonymity of players involved in cryptocurrency trading. So the both parties there, there’s an anonymity. And then also, as Valerie mentioned, it introduces new payment rails. So payments are, you’re going to have to follow them, they’re coming in from different directions. And you’ve got these anonymous players in there, and it presents some new challenges. So just a few things that are sort of going on in that space that can be very difficult to get a handle on.

Loraine Lawson
Yes. Earlier in the year, I spoke with Chief Risk officers and false positives were one of their main concerns. So I’m sure that will resonate with any CHIEF RISK officers out there listening. It does seem like we can’t get away from crypto, if you’re a financial institution you are going to have to engage with it was interesting what you said about, you know, the difficulties in cracking down on crypto, the Biden administration, this earlier this month, I think it was to take action to sort of crack down on that ransomware program, using sanctions to cut off digital payment systems that allow such activities to happen, especially in the crypto space. So that’s interesting. I think that’s all we have time for today. But Aaron, can you tell us a little bit about what you’re reporting on next week?

Aaron Marsh
Well, look for this, you mentioned, you know, how banks maybe can get involved in the crypto space. I just had a very interesting conversation with a consulting group that has a new service to discuss with banks, exactly that, banks and financial institutions that might be looking to get into this space. They’re offering a service to sort of explore all those possibilities with you. So I think that’s definitely one thing that’s on my radar screen that people should be looking for.

Loraine Lawson
Next week, I’ll be reporting on bot governance, what it means how you do it, some tips from some vapes and consultants. I also have a podcast with Finastra. They’re offering three strategies for becoming a next generation bank. So that should be fun. Thank you for joining us for the Weekly Wrap on The Buzz. For more podcast content, check out Bank Automation News and search The Buzz from Bank Automation News on iTunes and Spotify. Thank you.

5 questions with … BMO’s Atul Verma, CIO of U.S. personal and business banking

The Bank of Montreal (BMO) is in the trenches with automation. The $767.4 billion bank leverages robotic process automation (RPA) internally to improve the customer and employee experience, said Atul Verma, CIO of BMO’s U.S. personal and business banking division. “We have been on a journey for robotic process automation for quite some time as […]

Thiel-backed bank N26 to close 500,000 accounts in U.S. exit

N26 GmbH will discontinue its U.S. operations in the latest setback to the expansion plans for the German digital bank, which was recently valued at more than $9 billion.

Image by CanStock

The Berlin-based company will pull its offerings from the U.S. by Jan. 11 to prioritize expansion in Europe, it said in a statement on Thursday. The move will lead to it closing about 500,000 accounts, a spokeswoman for the bank said.

“We are sharpening our strategic focus on our core business in Europe for the time being,” Chief Growth Officer Alexander Weber said in a written statement to Bloomberg.

N26 wants to add more financial services in its home region, including investment products, the bank said. It’s also targeting expansion into additional countries in Eastern Europe and still plans to launch services in Brazil soon.

The U.S. move raises questions about the fintech firm’s ability to execute on its ambitious strategy. N26 exited the U.K. last year and faces regulatory headwinds in Germany, where it was told to improve its money-laundering controls.

The company was fined 4.25 million euros by Germany’s financial regulator in June because of delayed submissions of suspicious-activity reports. The watchdog also limited growth to 50,000 new customers a month to give the bank more time to work on its shortcomings.

The operational issues haven’t hampered investor backing for the company, which was founded in 2013. Last month, N26 raised money at a valuation on par with the market capitalization of Commerzbank AG, the country’s second-largest listed lender which traces its roots back to 1870.

N26, which has more than 7 million customers, entered the U.S. about two years ago. The firms backer’s include Third Point Ventures LP, Tencent Holdings Ltd., Allianz SE, Peter Thiel’s Valar Ventures and Li Ka-Shing’s Horizons Ventures.

U.S. customers will receive instructions on how to withdraw their funds, the bank said.

By Stephan Kahl (Bloomberg Mercury)

Temenos launches improved automations and developer support

Core and digital banking provider Temenos on Tuesday unveiled new automations and low-code support for attendees at SCALE, its virtual developer conference. Among the keynote announcements were additional low-code options such as standardized, drag-and-drop integration patterns, microservices, and more support for automated testing. The Geneva-based company also launched Temenos Exchange, which Martin Bailey, director of […]

Buffett-backed StoneCo sheds $22B in value since peaking

Brazilian payments firm StoneCo Ltd. plunged the most on record after disappointing results in the third quarter cast further doubt on the company’s recovery.

The fintech, which counts Warren Buffett’s Berkshire Hathaway Inc. among its backers, posted an adjusted net income of 132.7 million reais ($24 million) for the quarter, falling short of the average analyst estimate of 207.8 million reais and down 54% from a year earlier. Results were hurt by higher funding costs amid Brazil’s sharp monetary tightening and by a jump in operating expenses as the firm steps up investments.

Shares of StoneCo closed 35% lower to $20.70 in New York on Wednesday, well below its 2018 initial public offering price of $24. The stock is down 78% since peaking last February, having shed about $23 billion in market value during the period.

Graph by Bloomberg Mercury

“Funding costs should continue to put pressure on results,” with Brazil’s key rate likely reaching double digits in 2022, Bradesco BBI analysts Otavio Tanganelli and Gustavo Schroden wrote in a report Tuesday. Current consensus estimate of Stone achieving a 1.5 billion-real profit in 2022 “looks highly challenging,” they said, reiterating a neutral rating.

The company’s credit business has been under particular scrutiny since the company struggled with higher provisions a quarter earlier, with growing bad loans forcing it to halt lending. The company expects to resume lending by the first quarter of next year.

“The reality is that Stone without credit is not just much less profitable than investors were expecting, but it is also less profitable than the old Stone,” BTG Pactual analysts led by Eduardo Rosman wrote in a report Wednesday. “We are likely going to need to revise our estimates for 2022 by quite a lot.”

Last week, shares of rival Pagseguro Digital Ltd. gained after the firm boosted its volume growth guidance for the year and delivered an upbeat message on prospects for its digital-banking unit PagBank.

Stone, which was co-founded in 2012 by Andre Street and Eduardo Pontes, started by offering payment technology to merchants around Brazil. It later branched out to lending, offering money to small and medium-sized businesses by using credit-card purchases as collateral.

By Vinícius Andrade (Bloomberg Mercury)

nCino to acquire mortgage platform SimpleNexus

Cloud banking solutions provider nCino on Tuesday announced plans to acquire SimpleNexus, the developer of a mortgage lending platform used in one in seven mortgage originations in the U.S., in a stock and cash transaction valued at about $1.2 billion. Under the proposal, nCino would acquire SimpleNexus for approximately $240 million in cash and $960 […]

Nasdaq broadens efforts to fight fraud, money laundering

Beyond its familiar exchanges and indexes, Nasdaq also has a growing technology solutions business that targets fraud and money laundering across the financial sector. The online global marketplace uses its anti-fraud technology to serve a range of entities, from regulators and market infrastructure providers to banks and credit unions. “A lot of the technologies that […]

Deals and dollars: Socure pulls in $450M, catapults valuation to $4.5B

It was a diverse week for fintech funding, with hundreds of millions of dollars pouring into identity verification and buy now pay later (BNPL) technology companies and substantial investment in an automated compliance platform. Socure secures $450 million New York-based Socure closed a $450 million series E funding round, raising a total of $649.6 million […]

Open Lending logs 138% YoY jump in certified loans, increased refi penetration

Automation fintech Open Lending posted year-over-year increases in its certified loans despite industry headwinds as refinance volume grew and more credit unions and banks continue to sign onto its platform. Total certified loans, or “certs,” increased 138.4% YoY and 6.3% sequentially to 49,332, accounting for about $1.3 billion in auto originations. Credit union and banks, […]

AvidXchange targets credit unions with AI-enabled automation solution

Payment automation company AvidXchange is targeting credit unions with a customized offering that streamlines the invoice-to-pay process. The pandemic-induced spike in digital banking has led credit union members to expect cutting-edge banking solutions, Boyce Adams, senior vice president of financial services, told Bank Automation News. “This meant credit unions needed to spend more time on […]