JPMorgan head of fintech: Prepare for the ‘platform of platforms’ economy

Financial institutions should plan now for the next major tech-based business paradigm — the platform of platforms. If that’s confusing, think of Uber. A platforms platform essentially means one platform that connects to other platforms — just like Uber has done, Jeremy Balkin, head of fintech and innovation, wholesale payments at JPMorgan Chase, told audiences […]

Meadows Bank bets on new Jack Henry security solution

Jack Henry Banking is deploying SecurePort, a solution that seeks to help banks provide end-users with timely access to their accounts, in case bank systems fail. Jack Henry Banking is the banking division of core provider Jack Henry & Associates. Backing up critical customer account data each night by managing their vault or using a […]

Study: FIs reap ROI with intelligent automation

Upward of 90% of financial services firms are seeing business improvements as a return on investment from their automation efforts. The challenge, however, is finding the workplace talent to reap those benefits.   A study released Tuesday by intelligent automation and digital business services firm Emergn polled 320 executives, including 212 financial services technology leaders, at financial service, pharma and life sciences and insurance firms […]

Oracle expands its banking footprint with ERP cloud-based solution

The Oracle Corporation’s cloud-based enterprise resource planning (ERP) consolidating ledger has been implemented by Bank of America across 33 countries as the software company continues its focus on the banking vertical. The $3.02 trillion Bank of America can now view liabilities and assets in one platform rather than 33 individual platforms, Vinod Jain, capital markets […]

ESG: The devil in the data

Banks looking to custom build their own environmental, social and corporate governance (ESG) solutions must determine which data sets to use as they build out their ESG platforms. A wide range of datasets exists that measure ESG both broadly and minutely — so choosing the right dataset makes a difference. Global IT research consultants the […]

Bank of America partners with Indian school for new innovation center

As the pace of automation innovations accelerates, Charlotte, N.C.-based Bank of America is partnering with the Indian Institute of Management Ahmedabad (IIMA) — India’s premier global management school — to launch the Centre for Digital Transformation. The Centre, launched August 26, aspires to become a vibrant knowledge hub for academia, policymaking and the private sector […]

3 tenets to automating better and faster
Sam Aarons, CTO and Co-founder of Modern Treasury

Banks have made substantial investments to make their businesses more resilient, which helped many withstand the worst impacts of the pandemic.

But the transition to digital strategies and processes still rates as a big risk, ranking fourth in a recent EY survey of bank chief risk officers. Only credit, cybersecurity and climate-change risk ranked higher, EY found.

No matter what the industry, building modern systems can be a difficult challenge due to a variety of competing goals around speed, stability, security, longevity, and cost. To work with and upgrade legacy technologies and systems, companies need to manage these conflicting and sometimes contradictory attributes. When it comes specifically to the banking industry, the challenge can be even greater because of the narrow tolerances for failure and the high expectation of stability.

In building out Modern Treasury, which automates payments between companies and their banks, we have narrowed in on three core tenets that guide how we build software – ones that can help all organizations automating legacy systems.

1. Stability over speed

In software automation, there is always a push/pull relationship between stability and speed. Going faster may hurt quality, while spending more time on reliability often leads to growing timelines. The best companies understand this dichotomy and pick the balance that works best for their needs. If you’re a social media company, for example, it’s probably more important to be fast and remain on the cutting edge of the latest industry trends. In banking, there’s only one choice and that’s to be as stable as possible. Consumers and businesses have little tolerance for mistakes when it comes to their money or finances. Twitter’s “Fail Whale” became a cute symbol for the social media giant’s constant downtime, but if a large financial institution were in the same position, it would become unflattering national news. That’s not to say banking organizations shouldn’t strive to be faster (they should) but not to the detriment of the stability of what’s being built.

2. Know when to build and when to buy 

Many organizations have a tendency to build everything in-house due to a perception that doing so is “cheaper.” What these cost analyses so often miss is the continued maintenance and support costs associated with the project. Every piece of software, every line of code, is a liability. For projects that aren’t core to the organization or don’t help deliver a differentiating customer experience, the best course of action is often to just buy the software and move on. For instance, if you don’t have the software engineers who are experts in writing CI/CD software or in building APM software, it may make more practical sense to just use Buildkite and Datadog and concentrate on more core parts of your business.

3. Do it right the first time

Many organizations build incentive structures around having engineers just build what’s needed at the time without consideration for what would need to be built next.

But thinking long-term often pays off much more. If you do it right the first time, and consider how that software will be added to or rearchitected in the future to support more features, you can save precious cycles. Have engineers consider what might need to be built in the medium term and architect the current solution to account for that. Put another way, “If you had to support this later, how would that change your development approach today?”

This often means that the solutions take longer to build. But they’ll be more stable in the future when new demands are placed on them because they were designed with those demands in mind. Doing software development this way may cost speed in the beginning but, over the long term, it more than makes up for itself.

Sam Aarons is the co-founder and CTO of Modern Treasury, a platform that automates business-initiated payments. He was previously responsible for building the payment operations system at LendingHome, which has funded over $3 billion in mortgage loans.

Big week for buy now, pay later

Buy Now Pay Later (BNPL) companies continue to attract buyers and investors alike as this week saw neobank Revolut announce it would work on a BNPL product, and PayPal bought Japanese BNPL provider Paidy for $2.7 billion. Meanwhile, in fintech funding, European BNPL technology provider Scalapay revealed a closed funding round that raised $155 million, […]

Mastercard buys European open banking platform Aiia

Mastercard went on a buying spree this week with its acquisitions of Aiia, a European open banking platform, and CipherTrace, a cryptocurrency intelligence company. The credit card company did not disclose the details of either deal. Mastercard announced its plan to expand its open banking capabilities with the acquisition of Aiia, which offers a direct […]

Watch: Synthetic identity fraud presents growing threat, panel says

The real world poses as much of a threat as the online one, cybersecurity experts said in a Thursday webinar hosted by Bank Automated News. Synthetic identity fraud occurs when a criminal combines stolen identification, such as a Social Security number, with other identifying information to create a new, false identity. “One of the significant […]

Libor judge rejects halting use of benchmark in win for banks

A U.S. judge signaled he won’t immediately terminate Libor, rejecting an effort by a group of borrowers who argued the benchmark is the product of a “price-fixing cartel.”

Photo by Bloomberg Mercury

The tentative ruling Thursday by U.S. District Judge James Donato in San Francisco is a win for some of the world’s biggest banks, including JPMorgan Chase & Co., Credit Suisse Group AG and Deutsche Bank AG. The banks argued abruptly ending the London interbank offered rate would wreak havoc on financial markets and undermine years of work reforming the reference rate.

The plaintiffs, which include 27 consumer borrowers and credit card users, argued Libor is an illegal price-fixing agreement. The lawsuit seeks to prohibit the benchmark, or set it at zero with borrowers repaying capital but not interest.

Donato said he wasn’t convinced the consumers’ request for an injunction halting the use of Libor met the legal test of urgency.

“It’s been 35 years that Libor’s been on the books,” Donato said. “Isn’t that enough in itself to show there’s no irreparable harm?”

But the judge also said the litigation isn’t over.

“I’m not saying you don’t have an underlying case,” Donato told lawyers for the consumers. “That’s a different day.”

Libor is derived from a daily survey of bankers who estimate how much they would charge each other to borrow. It’s used to help determine the cost of borrowing around the world, from student loans and mortgages to interest-rate swaps and collateralized loan obligations, and continues to underpin hundreds of trillions of dollars of financial assets around the world.

In the wake of the 2008 financial crisis, regulators discovered that lenders had been manipulating the rates to their advantage, resulting in billions of dollars of fines. For over three years, policy makers around the globe have been developing new benchmarks to replace Libor.

The case is McCarthy v. Intercontinental Exchange, 20-cv-05832, U.S. District Court, Northern District of California (San Francisco).

— By Joel Rosenblatt (Bloomberg Mercury)

Varo Bank raises $510M in funding

Varo Bank, the first fintech to secure a national bank charter, today announced a $510 million oversubscribed funding round, a new raise that more than doubles the company’s previous funding, bringing total funding for the San Francisco, Calif.-based mobile bank to $992.4 million. The bank’s total valuation now stands at $2.5 billion, Alex Woie, head […]

Automating corporate actions: Data quality and tech standardization are key

There is an urgent need to automate corporate actions but challenges surrounding proprietary and legacy technologies, and data quality are standing in the way of progress. Nearly 40% of respondents to a recent survey of financial stakeholders said they process more than half of all their corporate action messages manually, with nearly 50% saying legacy […]

Listen: Banks deploy bots to ease mergers and acquisitions

Banks use robotic process automation (RPA) to merge back-end systems after acquisitions and are starting to automate more self-help for customers. That’s in addition to the more common use case of automating the creation of customer accounts, says Jesse McHargue, senior solutions engineer with RPA company Nintex, in this week’s episode of “The Buzz.” “I […]

5 Questions with Automation Anywhere CIO Sumit Johar

San Jose, Calif.-based Leading robotic processing automation (RPA) company Automation Anywhere has raised more than $849.3 million in eight funding rounds, and is preparing for its initial public offering. Bank Automation News sat down with newly appointed Chief Information Officer Sumit Johar to discuss his approach to automation and information technology (IT). The most common […]

UiPath rival Automation Anywhere plans IPO as soon as this year

Automation Anywhere Inc., a software company backed by SoftBank Group Corp.’s Vision Fund, is preparing for an initial public offering that could happen later this year, according to people familiar with the matter.

Photographer: Ben Torres/Bloomberg Mercury

The company, based in San Jose, California, focuses on robot process automation, which helps companies save time and money by automating repetitive, manual tasks such as entering data into spreadsheets.

Automation Anywhere is working with investment banks to assist it with its listing, the people said, asking not to be identified because the matter is private. The company’s plans haven’t been finalized and the IPO might not take place until 2022, the people added.

Representatives for Automation Anywhere and SoftBank Investment Advisers, which oversees SoftBank Vision Fund, declined to comment.

SoftBank is one of Automation Anywhere’s major investors, with Vision Fund investing $300 million in 2018. The company was valued at $6.8 billion in 2019, according to data provider PitchBook.

Automation Anywhere has raised about $840 million in funding from investors such as General Atlantic, New Enterprise Associates, Salesforce Ventures and Goldman Sachs Group Inc., PitchBook data show.

The company competes with UiPath Inc., which raised $1.54 billion in an IPO in April. UiPath’s shares have increased 13% since then.

— By Crystal Tse, Gillian Tan and Katie Roof with assistance from Liana Baker

Plaid CEO Zachary Perret asks Twitterverse how to support cryptocurrencies

Plaid CEO Zachary Perret wants to know: What should the data integrator build to support cryptocurrencies? Perret sent out the question via tweet today at 1:10 p.m. Within one hour, he had 61 replies, some of which he responded to by seeking more details or promising a response by direct message. Support for know your […]

Credit union to use alternative credit decisioning in treasury services

Numerica Credit Union will use alternative credit scoring solution Scienaptic AI to automate credit risk assessment for its treasury services. The $3 billion Spokane Valley, Wash.-based credit union offers treasury management services, such as ACH, remote deposit capture, wires, and the anti-fraud cash management service Positive Pay, said Ryan Bernard, vice president of Commercial Credit […]

Deutsche Bank’s ESG probe triggers review at asset managers

European asset managers are reviewing their ESG labeling and marketing claims following news of probes into the investing arm of Deutsche Bank AG, according to people close to the process.

Photo by Bloomberg Mercury

Anxiety around greenwashing — mis-stating how climate friendly assets are — is palpable across the industry as fund managers react to German and U.S. investigations of DWS Group. Though the Deutsche Bank unit says it did nothing wrong, the development has led to a moment of reckoning as fund managers wake up to a new regulatory era in which once fluffy environmental, social and governance definitions are no longer tolerated.

Since learning of the DWS probes, investment firms across Europe have been trying to establish whether they’ll need to reclassify assets previously identified as ESG, according to regulators and several executives at money managers. The people spoke on condition of anonymity as the process isn’t public.

One major European fund manager created an internal taskforce to review ESG procedures and products as a direct consequence of the DWS probes, one of the people said. Managers are checking older marketing material to make sure it doesn’t contain misleading language, while firms are reconsidering the words they use in public when declaring their dedication to ESG and sustainability, another person said.

Meanwhile, cash continues to flood the market for climate-friendly investments amid growing unease at the pace of global warming. ESG-focused exchange-traded funds have attracted net inflows every week for the past year, and Bloomberg Intelligence estimates that ESG assets will balloon to more than $50 trillion by 2025, making up well over a third of the total market.

Stricter European regulations have already forced the finance industry to abandon some of its ESG claims. Between 2018 and 2020, the label was stripped off about $2 trillion of assets, suggesting that other regions might be facing a similar correction once regulations catch up.

In the U.S., the Securities and Exchange Commission has made clear it intends to crack down on inflated ESG statements. On Wednesday, SEC Chairman Gary Gensler said he’s ordered staff to review funds’ language around climate and socially friendly investing.

“Many funds these days brand themselves as ‘green,‘ ‘sustainable,’ ‘low carbon,’ and so on,” Gensler said, according to the text of a speech delivered to the European Parliament Committee on Economic and Monetary Affairs. “I’ve directed staff to review current practices and consider recommendations about whether fund managers should disclose the criteria and underlying data they use to market themselves as such.”

The investigations into DWS followed allegations by its former head of sustainability, Desiree Fixler, who said the firm had inflated its ESG assets. Fixler, who was hired last September as DWS’s first ever sustainability head, was fired in March, just one day before the firm published its full-year results.

Fixler says DWS’s management “knew many portfolio managers weren’t complying with their ESG integration policy.” The reasons varied “from disbelief in ESG to distrust of the ESG Engine,” the firm’s proprietary ESG analysis software tool, because its data was “too backward looking,” she said in an interview.

A DWS spokesman declined to comment, “beyond our previous statement that we firmly reject the unfounded allegations being made by a former employee.”

But the allegations represent a setback for DWS Chief Executive Officer Asoka Woehrmann and his boss, Deutsche Bank CEO Christian Sewing. Both have been keen to tout their firms’ ESG credentials as a way to win business in what’s become a highly lucrative market. And both executives have repeatedly declared their commitment to ESG at conferences, investor events and in interviews.

The Numbers

Fixler says she was dismissed after questioning DWS’s labeling of ESG products. The firm reported 459 billion euros ($545 billion) of “total integrated ESG assets” at the end of 2020, compared with the roughly 94 billion euros that it reported as ESG “dedicated” assets. By the second quarter, DWS said it had just over 70 billion euros in ESG assets, and a further 16.4 billion euros of “illiquid green-labeled single assets in non-ESG classified products,” after applying its “revised ESG product classification approach.” It didn’t report an “integrated” ESG figure.

DWS says it stands by its annual report disclosures and has rejected Fixler’s claims. The firm will “remain a steadfast proponent of ESG investing as part of its fiduciary role on behalf of its clients,” it said last Thursday.

In March, the European Union enforced the Sustainable Finance Disclosure Regulation, which is intended to function as an anti-greenwashing rulebook. SFDR has already forced a massive shift in ESG labeling. But the DWS investigations appear to have shocked the industry into more urgent action as it dawns on managers that false ESG claims may trigger an aggressive regulatory response.

Daan van Acker, a data analyst at nonprofit InfluenceMap, said it’s clear stricter regulations are needed around ESG to prevent a loss of confidence in the label. It’s a field that still needs “more clarity and consistency for investors,” he said. “That is the end goal we want to see here.”

— By Steven Arons, Frances Schwartzkopff and Nicholas Comfort (Bloomberg Mercury)