BMO converting to cloud-based risk management analytics

Bank of Montreal will leverage a proprietary, cloud-based, risk management analytics solution to forecast loan loss scenarios faster and with better cost-efficiency. BMO Chief Executive Darryl White referenced the system during the bank’s earnings call Wednesday.   “We continue to modernize our technology through cloud,” White said. “For example, we’re converting to a proprietary platform […]

Lenders to start acquiring fintechs to form ‘super apps’

Lenders may soon have the opportunity to acquire fintechs at depressed valuations as economic conditions decline and fintech operational costs soar. “It is a hard life to be a single-product company,” Christina Melas-Kyriazi, partner at venture capital firm Bain Capital, said at the recent FinovateSpring 2022 conference, noting that fintechs need support from investors to […]

Citi speeds ‘full-throttle’ toward AI-based credit management

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Broadcom to buy VMware for $61 billion in record tech deal

Broadcom Inc. agreed to buy cloud-computing company VMware Inc. for about $61 billion in one of the largest technology deals of all time, turning the chipmaker into a bigger force in software.

VMware shareholders can choose to receive either $142.50 in cash or 0.2520 shares of Broadcom stock for each VMware share, according to a statement on Thursday. The offer represents about a 44% premium to VMware’s closing price on May 20, the last trading day before Bloomberg News reported potential takeover talks.

The deal is the biggest takeover ever for a chipmaker and extends an acquisition spree for Broadcom Chief Executive Officer Hock Tan, who has built one of the largest and most diversified companies in the industry. VMware bolsters Broadcom’s software offerings — a key part of Tan’s strategy in recent years. He acquired corporate-software maker CA Technologies in 2018 and Symantec Corp.’s enterprise security business in 2019.

Broadcom’s offer — coming during a market downturn for tech stocks — has the support of key VMware shareholders Michael Dell and Silver Lake, and includes a so-called go-shop provision that allows VMware to solicit competing offers.

Broadcom, one of the most valuable companies in the chip industry, sells components for everything from the iPhone to industrial equipment. But it’s seeing some of its biggest growth from data centers — the massive server hubs that power cloud-computing services — and bulking up on software helps it further serve that market.

The purchase adds to a run of deals for the global tech industry this year. Microsoft Corp. agreed in January to buy video game publisher Activision Blizzard Inc. for $69 billion. A consortium backed by Vista Equity Partners is acquiring software maker Citrix Systems Inc. for $13 billion, and Elon Musk announced a $44 billion buyout of Twitter Inc. in April. The largest previous deal involving a chip-maker was AMD Inc.’s $34.1 billion takeover of Xilinx Inc.

Tan had warned investors in March that he was on the hunt for deals, saying at the time that the company had the capacity for a “good size” acquisition. Bloomberg News first reported that the VMware talks were underway on May 22, and that company’s shares soared 25% the next day.

Slashing expenses has been a key part of Tan’s strategy when he buys companies. Broadcom cut the cost base at CA and the Symantec business by 60% to 70%, according to Sanford C. Bernstein.

“Building upon our proven track record of successful M&A, this transaction combines our leading semiconductor and infrastructure software businesses with an iconic pioneer and innovator in enterprise software,” said Tan in a statement.

Broadcom has received commitments from a consortium of banks for $32 billion in new, fully committed debt financing to help fund the deal, and is expected to be completed in Broadcom’s fiscal year 2023. Broadcom will also assume $8 billion of VMware net debt. The deal includes a go-shop provision where VMware can solicit alternative proposals for 40 days.

Broadcom was previously in talks to purchase SAS Institute Inc., a closely held software company valued at $15 billion to $20 billion. But those discussions ended last year without agreement.

Broadcom’s most ambitious takeover attempt ever also failed to gain traction. The company tried to buy rival chipmaker Qualcomm Inc. but had to walk away from the deal in 2018 after resistance from the Trump administration. Broadcom’s Singapore headquarters was an issue for regulators at the time, but the company has since switched its domicile to the US. It’s now based in San Jose, California, about 20 miles from VMware’s Palo Alto headquarters.

VMware is a pioneering Silicon Valley company that was founded in 1998, the same year as Google. It invented virtualization software, which consolidated applications and workloads on a smaller number of server computers. The innovation made it easier for servers to handle more than one program.

Such software was valuable when businesses managed their own servers, but as companies began relying more on giant cloud providers, VMware’s role was less clear. It struggled to maintain growth and ultimately forged a partnership with Inc., one of the biggest providers of cloud storage and services.

Even with the challenges, VMware could become the “crown jewel of Broadcom’s software division,” according to Angelo Zino, an analyst at CFRA.

VMware has already changed hands before. In 2004, it was acquired by storage technology giant EMC Corp., which then sold a portion of its stake as part of VMware’s initial public offering three years later. The business passed to Dell Technologies Inc. when that company acquired EMC in 2016.

VMware spun off from Dell last year, but Dell and private equity backer Silver Lake remain top investors in the software company.

Software would help decrease Broadcom’s reliance on chips. But its earlier forays into that market haven’t always been cheered by investors. Tan has argued that he looks for businesses that are “franchises” — ones that hold a strong market position and can be made more profitable without pouring in huge investments.

Chipmakers like Broadcom have enjoyed booming sales in recent years, fueled by the spread of semiconductors into more products — as well as by the need for work-from-home technology during the pandemic. But Tan has warned that the boom times probably won’t last.

Even after giving a rosy sales forecast in March, Tan said that the semiconductor industry won’t be able to stay on its current trajectory. He expects the chip business to decelerate to historical growth rates of about 5%.

“If anyone tells you otherwise, don’t believe it, because it has never happened,” he said on a conference call at the time. Industry leaders claiming that the semiconductor industry can grow at the current rate for an extended period are “dreaming,” he said.

Goldman Sachs Group and JPMorgan Chase & Co.  are advising VMware while Broadcom is working with Barclays Plc, Bank of America Corp., Credit Suisse AG, Citigroup Inc, Morgan Stanley and Wells Fargo & Co.

–By Dina Bass and Liana Baker, with assistance from Nate Lanxon (Bloomberg Mercury)

Lenders need to stop ‘checking boxes’ for DEI to flourish

Diversity, equity and inclusion (DEI) efforts at financial institutions need to go beyond a checkmark on a list of to-dos to become part of a lender’s DNA.

At $1.94 trillion Wells Fargo, “from leadership, I think we have the commitment, but I think we all are, admittedly, still in that check-the-box phase,” Nathan Bricklin, head of workplace experience at the bank, said during a recent panel discussion at the 2022 FinovateSpring conference. “For culture to really be successful, we’ve got to get out of that.”

Still, the financial services industry is “being productive” on DEI initiatives, Bricklin said.

“We have a lot of employee resource networks, but they’re mainly social, it’s educational. We really need to embed those networks into how we get business done,” he said. “We ought to have a rotating advisory group made up of people from those networks who influence our business strategy in our roadmaps for implementation.”

Wells Fargo has implemented an advisory committee that helps Bricklin “think about what I’m going to do next in the workplace,” he said.

Lenders can add to the legitimacy of employee resource groups (ERG) by making those positions paid, Malia Lazu, chief executive at consultancy firm The Lazu Group, said during the panel.

“Some of the best practices around ERGs is that they’re paid positions, so it’s not people doing things off the side of their desk,” Lazu said.

“It goes to show that we don’t actually believe that diversity is profitable,” she said, citing studies from consultancy firms McKinsey and Deloitte. “Diverse teams are … more profitable, they’re more likely to enter a new market successfully. It makes a lot of sense for a lot of other bottom lines at the bank, not just talent attraction, not just talent retention.”

Editor’s Note: This piece previously appeared on Bank Automation New’s sister site, Auto Finance News.

Bank Automation Summit Fall 2022, taking place Sept. 19-20 in Seattle, is a crucial event on automation and automation technology in banking. Learn more and register for Bank Automation Summit Fall 2022.

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Financial institutions are leveraging Amazon Web Services’ (AWS) machine learning (ML) and artificial intelligence (AI) tools to improve operations and customer experience. FIs are deploying tools for facial recognition, natural language processing and customer interactions, Alvin Huang, a capital markets specialist in business development and financial services at AWS, said Tuesday during the AWS Financial […]

Bryce Elliott, Truist CIO, joins Bank Automation Summit Fall speaker faculty

Bryce Elliott, Truist’s chief information officer for wholesale and enterprise payments, will join the panel “In the Air: How to Develop for the Cloud in Order to Enable Technology Strategy” on Monday, Sept. 19, at 10 a.m. UTC at Bank Automation Summit Fall 2022. The summit will be held Sept. 19-20 at the Hyatt Olive […]

Transactions: Scienaptic AI, Teslar Software continue run of community bank wins

Swiss core provider Temenos will upgrade digital banking at Canadian Tire Bank, the companies announced Wednesday.   Temenos, one of the world’s largest core providers, will enhance account opening and buy now pay later (BNPL) capabilities for the $6 billion Oakville, Ontario-based bank, whose customer base clears 2 million customers.  Canadian Tire Bank selected Temenos over […]

Open banking: Balancing innovation with security

After years of stop-start evolution, the market boom that open-banking advocates have been waiting for appears to be underway. The potential of this sector is as large as it is untapped with the sector projected to be worth $43.15 billion by 2026, equivalent to an annual growth rate from 2019 upwards of 24%. Open banking […]

JPMorgan Chase allocates nearly half of infrastructure spend to cloud

Half of JPMorgan Chase’s total infrastructure spend is on the cloud, the bank announced Monday during its 2022 Investor Day. Investors were left scratching their heads in January when the $4 trillion global bank announced it would increase its 2022 tech spend by 20%. During Monday’s 2022 Investor Day, which included a 20-minute technology presentation […]

Chase CIO: 3 advantages banks have in the race for tech talent

Banks have inherent advantages over fintechs in the race to recruit top tech talent although fintechs are often viewed as more efficient and faster-moving than banks. “Technologists have highly valued skills and the competition to attract them is fierce across all industries,” Gill Haus, chief information officer, Chase at $3.7 trillion JPMorgan Chase, told Bank […]

Plaid adds ID verification tool

Plaid released a biometric Identity Verification (IDV) tool last week that will integrate into its account linking services in an effort to streamline customer onboarding.   IDV handles authoritative data source, documentary and liveness verification, as well as more than 16,000 possible document types, according to the announcement. It also automates verification checks based off […]

US Bank leverages Real-Time Payment network with Apex Fintech Solutions

Fintech Apex Fintech Solutions is leveraging U.S. Bank’s real-time rails to offer real-time payments on its digital custody and clearing platform in the type of partnership the $587 billion bank hopes to foster with other fintechs in the future. Apex Fintech Solutions is a business-to-business fintech that sells fractional shares. It digitizes what has been […]

Listen: Banks should forget crypto payments, identify use cases

As crypto continues to gain traction with banks and financial institutions, experts are cautioning against moving away from its traditional use cases. Banks as diverse as $1.6 trillion Goldman Sachs and $122 billion Signature Bank have dipped their toes into the cryptocurrency pool, with Goldman Sachs originating its first Bitcoin-backed loan in April and Signature […]

US Bank launches Spanish voice assistant for auto loan servicing, banking

U.S. Bank’s Spanish-speaking customers can now service their auto loans by speaking into the bank’s mobile app. The Minneapolis-based bank last month launched a Spanish-language version of its smart voice assistant — Asistente Inteligente de U.S. Bank — that allows consumers who select Spanish as their preferred language in the app to search for checking […]

Fintech Funding: Millions flow to bill-payments solution, API firm and core provider

Indonesian business payments infrastructure and API suite provider Xendit on Thursday raised $300 million in a series D funding round, bringing the company’s total raised to $538 million. The fintech over the last 12 months more than tripled its transactions processed annually from 65 million to 200 million and increased total payments value from $6.5 […]

By the Numbers: Commercial customers’ interest in digital banking grows

Commercial banks are still playing catch-up when it comes to digital account opening, even as more business banking customers move online. Commercial customers are moving their businesses online, with 32% of 127 banking executives surveyed saying their clients now primarily interact via mobile and 29% interact by desktop, according to a recent report by Phoenix-based […]

Listen: Akoya’s head of solutions speaks on ‘de-risking’ open finance

Before inking deals with the nation’s biggest banks and financial institutions, fintech Akoya was focused on secure open finance. The Boston-based fintech, which originated as an application programming interface (API) division under Fidelity Investments, is now owned by several banks, including the $3.24 trillion Bank of America, $2.3 trillion Citi and $1.95 trillion Wells Fargo. […]

4 strategies banks can implement to launch digital transformation

SAN FRANCISCO — Digital transformation is trending in the lending community, but while many banks initiate the process “very few actually succeed,” Starling Bank founder and Chief Executive Anne Boden said Wednesday at FinovateSpring 2022.

“Everybody wants to transform, everybody wants to be a new, innovative, creative player,” Boden said. “But actually, launching a digital transformation … is ever so complicated.”

Chase and Citibank, for example, started digital transformation initiatives, but the projects ended up failing, she said, noting that while “most change initiatives fail” that is how change happens.

At Starling Bank, which has 3 million accounts and represents 8% of the business banking market, the focus is on new technology and constant change, Boden said. The bank releases software roughly 10 times per day, she added.

While implementing new technology and eliminating the fear of change presents a challenge, lenders can lean on the following four strategies to change the experience for consumers from the core of the bank outward:

1. Less planning, more doing: “Why are we still spending 90% of the time on project planning and only 10%, or even 5%, on doing?” Boden said. Lenders need to move away from the idea that planning is cheap and coding is expensive because now, technology “is easier to build and easier to iterate.”

“For those chief technology and chief information officers in the audience that have been told to plan, plan, plan … forget that knowledge, it is no longer relevant,” she added.

2. Change is not a risk: “Modern-day technology and modern-day projects are all about a little bit of change very, very often,” Boden said. Lenders must spend less time worrying about what might go wrong, and more time worrying about their reaction if something actually does go wrong.

“Don’t be fearful of change,” she said.

3. Delegate decision-making: Lenders benefit from delegating their decision-making power to those with day-to-day knowledge about an organization’s technology and coding, Boden said. People at the top often think they know it all, but they don’t. And giving up power – which might seem terrifying – will result in “better decisions,” she said.

4. Strengthen the bank’s core: Lenders implement service partners, build apps and automate their core systems, “but nobody is replacing [their processes],” Boden said, noting banks are afraid of changing their core systems because “projects go wrong.” However, “you’re not going to get the real benefit of a new transformation of a new set of technology of your business unless you transform the core,” she added.

Editor’s Note: This story was previously published on Bank Automation News’ sister site, Auto Finance News.

Bank Automation Summit Fall 2022, taking place Sept. 19-20 in Seattle, is a crucial event on automation and automation technology in banking. Learn more and register for Bank Automation Summit Fall 2022.

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