2023

Cloud technology for distribution and processing of market and reference data is disrupting financial data management. According to a comprehensive research report by Market Research Future, the financial cloud market size is expected to reach US$ 52 billion by 2028, growing at a compound annual growth rate of 24% between 2018 and 2028.

by Mark Hermeling, CTO, Alveo

The migration of market and reference data to the cloud has been an ongoing process for several years.  Shifting to the cloud has not only reduced infrastructure and maintenance costs by moving off on-premise infrastructure to increase scalability and elasticity, and therefore ensure an element of future-proofing, it has also helped reduce the cost of market data management through appropriate-sized infrastructure, centralised licensing and more easily sharing data sets.

The use of cloud-native technology can make the approach more easily scalable depending on the intensity or volume of the data. Using cloud-based platforms can also give firms a more flexible way of paying for the resources they use, including driving an organisation-wide standardisation of data charging and consumption. In addition to this, an improved data lineage ensures that source data and any transformation in the data’s lifecycle can be clearly captured. This transparency not only helps firms optimise and share their data assets internally where appropriate but reduces the cost of change.

Shifting the ecosystem to the cloud

All the above show the benefits of moving to the cloud. Today, we are witnessing a seismic shift in the market and reference data management process, with the whole data ecosystem now migrating to the cloud, where financial services firms can move away from slow manual processes and fragmented on-premise systems and start reaping the rewards of improved efficiency and lower costs that the cloud can bring.

Data vendors are starting to push their products directly onto cloud platforms like AWS, Microsoft Azure and Google Cloud Platform. Added to that, we are witnessing providers of applications like portfolio management systems, trading solutions and risk and settlement systems, moving there also. Again, they are being attracted by the enhanced security and scalability, increased efficiencies and reduced cost cloud deployment can bring. So, rather than it being a case of companies placing individual applications in the cloud or using specific software as service providers to host their data management platforms, the entire data ecosystem is now moving to the cloud.

The implications are that data management systems need to be both cloud-agnostic and cloud-native to optimally source, integrate, quality-control and distribute market data. In other words, systems used need to be designed and built to run in the cloud and to work effectively in that environment but at the same time, they should not rely on a single cloud provider’s proprietary services or in any way be locked into a single cloud vendor.

With this shift accelerating, firms need to find new ways of provisioning data onto the cloud and into their applications that also reside there – and it is increasingly urgent that they do if they want to keep up with the competition and retain their edge over their rivals.

Every firm will need to consider everything: from building in more robust information security to keep data safe in the cloud right through to enhanced permissions management, usage monitoring, and of course, data quality, which is always a topic. That’s important. After all, if organisations automate more, put more applications in the cloud, or simply more directly connect them, then data quality becomes even more critical because the process of change removes what is typically a manual step in between cloud and on-premise, which could potentially act as a safety net to prevent mistakes escalating quickly into significant issues.

Achieving all this can be made easier through the partial or full utilisation of vendor-managed solutions with a ‘one-stop-shop’ for the end-to-end provision of market data from vendor feeds all the way to distribution to their customers. It is, after all, essential that cloud environments are optimised to achieve maximum efficiency. To be truly effective, these solutions need to be cloud-neutral: part of which involves being capable of interacting with data on any public cloud platform.

Starting the move today

Given all the above, while the ongoing migration of financial services market reference data to the cloud is nothing new, the migration process is now gathering pace. It is now longer just data management solutions and processes that are moving over to the approach. Upstream, data vendors are putting data on public cloud platforms and, downstream, application providers are doing so also.

There is therefore a growing imperative for financial services firms to shift their market and reference data to the cloud. They can’t afford to wait if they want to remain competitive. However, in migrating their approach, they will need to opt for cloud-native solutions that support ease of use and ease of management. These solutions will also need to be cloud-neutral and cloud-agnostic to deliver the scalability that firms will need moving forwards.

Moreover, in rolling out their approach, financial services businesses will also benefit from opting for a managed services approach to data management which allows them to tap into all the benefits of the cloud while eliminating the day-to-day burden of data processing and platform maintenance. With all that in place, they will be well placed to maximise the benefits of having their financial data in the cloud.

Of all the FinTech and banking trends of the past few years, the story of Buy Now, Pay Later (BNPL) stands out as one of the most prominent and memorable. During a period of tumult and uncertainty, BNPL seemed to go from strength to strength, growing exponentially in scale and popularity and swiftly being incorporated into the offerings of some of the world’s largest and most influential companies.

by Ion Fratiloiu, Head of Commercial, Yobota

Breaking financing down into multiple fixed repayments has allowed consumers to increase their short-term spending power, which can be a tremendous advantage to those with regular income that lack saved capital. The benefits aren’t limited to the user, of course. Retailers are reaping the rewards of this heightened spending power, while BNPL providers have grown in tandem with the product’s popularity.

BNPL is not a license to spend with abandon – it is ultimately a credit product, and its misuse can have adverse effects on the consumer’s credit rating and financial wellbeing if repayments are missed. It is a tool that has the power to help consumers reach their immediate goals, but one that must be treated with care and caution.

With Which? estimating in July 2021 that a third of UK consumers reported having used a BNPL product at least once, this convenient lending system has clearly landed in the business to consumer (B2C) sector with aplomb, changing expectations and best practices for lenders and retailers alike. This sea-change, however, is not limited exclusively to B2C – the next destination of the Buy Now, Pay Later revolution is in fact other businesses.

Back to B2B

The next giant leap for BNPL might stem from its usefulness to startups and small-to-medium enterprises (SMEs). Liquidity and financing are common obstacles for businesses in their early stages, and while specialist services do exist to cater to these issues, BNPL can provide a greater degree of control, flexibility and transparency that could prove invaluable to businesses that are in the process of levelling up.

Support for SMEs and startups comes in many forms, but overreliance on incubators and seed funding can stunt the overall development of the sector. Sometimes, businesses need to be able to manage their own finances at speed, needing short-term injections rather than waiting for their next seed round. Traditional lending options are available, and have existed for years, but can be slow to secure and be laden with complex terms and conditions.

This is what makes BNPL for Business such a tempting proposition. The ability to spread repayment for specific purchases over an agreed period suits businesses with predictable revenues but little capital – like a subscription-based startup or a growing company still awaiting funding. BNPL can make borrowing frictionless and consistent in a way existing options cannot.

This isn’t only good news for small businesses – growth in the BNPL for the Business sector could fuel the same growth that B2C did, with all parties involved able to benefit. We could see SMEs experiencing improved cash flow management and spending power, and specialised B2B BNPL providers expanding with the same speed as their B2C counterparts.

Power to pay your own way

The driving force behind the rate of change within BNPL is the strength of modern core banking. Banking as a Service (BaaS) has simplified the process of setting up seamless and scalable lending and payment solutions to the point that any business can create their own financial products with ease. This means that not only can more businesses offer SMEs lending options, but more SMEs can create their own BNPLs and offer split payments through their own platforms.

In the UK alone, BNPL usage almost quadrupled in 2020, totalling an astounding £2.6b in transactions – this sort of opportunity should not be exclusive to major brands and eCommerce retailers. Whether using the services themselves or offering them to their users, SMEs should consider adopting BNPL as part of their approach if they want to stay ahead of the curve.

The year of BPNL for small business

While the world’s largest companies like Amazon and Apple have already embraced BNPL, enjoying banner years of their own, the success of new businesses is a more encouraging metric of our economy rebuilding. Seeing more SMEs and startups turn to Buy Now, Pay Later could be an indication of better things to come, and of different industries and sectors beginning to get back on their feet.

2022 is a year for optimism, for looking forward and having confidence in better things ahead. BNPL is one area with the potential for success, and the opportunity at hand is there for the taking. All small businesses need to do is embrace it for themselves.

From launching his financial career at Deutsche Bank, Ion spent a number of years consulting in the equity capital markets space and leading sales growth for FTSE500 company Fiserv and core banking provider Thought Machine. He joined Yobota in 2021 to launch its commercial operation, leading GTM strategy and building a diverse and multi-faceted team to take the company to the next stage of growth.

Supported by a payments ecosystem that becomes increasingly more sophisticated each day, and driven by accelerated digital transformations following the pandemic, the payment methods consumers have at their disposal today are myriad. Not only are Alternative Payment Methods (APMs) proliferating across the globe, they are already dominating cards in some countries and consumers are developing specific preferences according to region or country.

by Kristian Gjerding, CEO, CellPoint Digital

Armed with and accustomed to this array of APMs, consumers can spend their money in multiple, digital-first ways almost anywhere in the world from card or cash-based wallets to mobile payments, to paying by instalments.

Merchants who are unable to accept these APMs risk creating customer friction points that interfere with their growth ambitions and prevent them from scaling their businesses to serve a global customer base.

The rise and rise of APMs

Consumer adoption of APMs is growing exponentially and was believed to account for over half of all global e-commerce payments in 2019 – the last year for which results are available. At a more regional level, it is reported that in Europe, upon reaching the Point of Sale (POS), 80% of consumers have an expectation to pay for their goods and services with a digital payment method rather than a typical debit or credit card.

Meanwhile, across the Asia-Pacific (APAC) region, nearly all consumers (94%) report that they would consider using an APM in 2022 and within the Middle East and North Africa (MENA) experts are saying digital wallets are set to be the region’s preferred means of making payments. Owed largely to the pandemic and the necessity for online, digital, and contactless payments, Latin America is also catching up with 55% of the population now banked and the use of APMs on a steady increase.

As we can see, consumers are shifting towards APMs in ever-increasing numbers. For merchants with cross-border growth ambitions, it means that developing an APM strategy is now crucial for penetrating global markets and driving revenues.

Tackling cart abandonment

‘Cart abandonment’ is an inevitable bugbear for online merchants with 70% of shoppers deserting their virtual trolley at the point payment is requested.

As an increasing number of merchants with ambitions of international growth are experiencing, an inability to accept a customers’ preferred payment method is one of the more reliable ways to kill a conversion. Indeed, a recent study in the US found that 42% of American consumers will bring a purchase to a halt if their favourite payment method isn’t available.

The problem for merchants is, with all these different payment methods, some more popular in specific regions than others, and with a gauntlet of contrasting international regulations to navigate, implementing and managing all these methods can be incredibly difficult.

It is partly because of their ability to confront this friction that payment orchestration platforms are growing in prevalence.

Enter the payments orchestration provider

According to PYMNTs, the global market for payment orchestration platforms is also expected to grow 20% every year between 2021 and 2026. With each new merchant implementing the technology, consumers across the globe have a new place to spend their money in whichever way suits them best.

The platforms provide merchants with a single interface through which all transactions between themselves, their customers, and their payment providers are initiated, directed, and validated. The agility this confers to merchants who would otherwise need to manually integrate new APM options – resulting in protracted time-to-market and decreased competitiveness – is considerable.

Moreover, the complexity of monitoring the performance of multiple, manually integrated, and siloed payment methods would add to these obstacles and delays. Here, payment orchestration intercepts by automatically aggregating and processing these crucial data streams and providing merchants with valuable, real-time analytics that save time, prevent human error, and aid decision making.

This speed to market coupled with comprehensive real-time reporting allows merchants to begin increasing revenues in the short-term and make better decisions to facilitate growth in the long-term. However, the opportunities to enhance cash flows don’t stop there.

When a merchant relies on a single acquirer/PSP it is they who have ultimate control over transaction flows. For example, if the PSP succumbs to an outage, the merchant is subsequently and directly impacted. Likewise, if the PSP routes transactions to a specific acquirer, the merchant can do little if the costs they incur from this acquirer are unfavourable to them. A payment orchestration provider redresses this imbalance by transferring control of the transaction flow back to the merchant by allowing them to create real-time rules for switching transactions and offering APMs to consumers. This dynamic routing improves the success of processing rates, gives customers more payment options, and means failed transactions can be re-routed to the next acquirer leading to fewer lost sales.

Collectively, these various payment orchestration features and functionalities both unleash the potential of APMs and provide merchants with the speed and flexibility to drive revenues to ambition-exceeding levels.

Partnership with payment orchestration platform provider is key

By plugging directly into existing core or eCommerce systems, payment orchestration platform providers allow merchants to go straight to market with a growing payment ecosystem where the best-suited partners are easily picked and added. With their online checkouts optimised to accept a full suite of APMs, opportunities for growth quickly begin to multiply.

Merchants can display their products or services across multiple digital channels knowing that consumers can pay using whichever APM they prefer. This reduces cart abandonment rates and allows merchants to target specific regions by demonstrating their ability to accept the most popular APMs consumers in that region use.

Payment orchestration enabled APMs to add agility and dynamism to today’s merchants that allow them – for the first time – to give consumers whatever payment method they want, wherever they are. As the adoption of APMs continues its steep upwards trend, this capability will only become more essential for merchants looking to thrive on a global scale.

Online auction platforms have accelerated the digital migration of the art market, which has traditionally been slow to embrace innovation. Whilst this may seem unsurprising amid the headlines of NFTs taking the art world by storm, it is all the more interesting that online auctions have driven the continued robust distribution of physical art.

by Garry Jones, CEO, NovaFori

This rapidly growing technology, therefore, gives us a glimpse of the future of fine art and collectibles, not by dispensing with the physical in favour of the digital, but by uniting the two in a more symbiotic ecosystem that better serves both those who collect works of art and those who facilitate their sale.

Online auctions in fine form

Leading auction houses such as Christie’s have now firmly embraced online auctions, with the pandemic accelerating uptake significantly since the early months of 2020. This has enabled auction houses to retain some semblance of business as usual amid the disruption caused by Covid-19, and now, nearly two years later, online auctions are expected to account for 25% of all art sales by the end of 2021.

Auction houses are clearly not looking backwards, not least because this digital migration of art sales has unlocked a much more extensive geographical and demographic customer base. Online auctions hold far more appeal among younger people, for instance, compared to the financial and environmental cost of travelling to an auction in person.

Moreover, the data-driven insights gained from the most innovative auction platforms empower those facilitating sales to make the most of these demographic shifts. Platforms equipped with a machine learning function, for example, can help auctioneers become attuned to the appetites of registered consumers based on their bidding history, enabling them to set pricing estimates more effectively.

NFTs: An auction(ed) token

While online auctions have helped keep the traditional art market relevant for new audiences, they also allow auctioneers to explore a new aspect of their business which is entirely online: Non-Fungible Tokens (NFTs). As a purely digital asset class, NFTs are only bought and sold via online marketplaces – and the burgeoning popularity of these once-obscure assets has thrust them into the limelight.

Indeed, institutional auction houses have now begun to heed the gradual increase in consumer confidence around this new breed of collectible. Following its landmark sale of digital artist Beeple’s ‘The First 5,000 Days’ in March 2021, Christie’s has now sold more than $100 million-worth of NFTs, not including the recent $29.8 million sale of Beeple’s ‘HUMAN ONE’ artwork.

Although some critics have decried the nascent NFT market as a bubble waiting to burst, such a fall in demand may in fact yield a slower, more sustainable level of growth which will facilitate the long-term maturity of the market. Thus, the outlook for NFT sales remains optimistic, and so too does the outlook for the online infrastructure which underlies it.

Growing, growing, gone?

Online auction platforms, therefore, retain considerable scope for growth, far beyond the pandemic which has accelerated the early stages of their development. In fact, a survey conducted in 2020 found that 56% of art buyers foresaw a permanent switch to digital sales. Considering the aforementioned benefits of online auctions for both buyers and facilitators of sales, it is easy to see why this would be so popular.

Moreover, platforms that facilitate online sales, whether the items themselves exist on a physical level or not, will remain viable precisely because of their usefulness for different types of auctions. Their rapid rise is by no means the death knell of the physical art market; it is instead part of the increasing convergence of the physical and digital worlds.

Finally, bridging the gap between the physical and the digital will only grow in importance as in-person auctions return in some form. These will most likely consist of hybrid events, where participants can attend online as well as in-person depending on their preferences. In the uncertain pandemic context, leveraging technology capable of delivering robust buyer and auctioneer experiences will be all the more critical and not just in the art world.

Businesses of every kind have been affected by the COVID-19 pandemic. The banking sector has not been immune: for some banks, the economic impact has been notably acute. In response, the move to online financial services has accelerated at a dramatic rate as a plethora of fintechs, so-called “neobanks” and non-traditional financial service companies, continue to expand their activities. As the payments phenomenon became truly global during the pandemic, Africa has emerged as a new FinTech hub.

by Manoj Mistry, Managing Director, IBOS Association

An increase in investment has led to African FinTech companies expanding their services across the continent. The potential is enormous, particularly in sub-Saharan Africa – a region that has traditionally suffered from limited access to financial services. As Africa’s largest economy with a population of nearly 210 million, Nigeria received more than 60% of Africa’s inbound FinTech investment in 2021. But over 50% of Nigerians do not yet have a bank account.

Last year, four African FinTech companies achieved unicorn status with $1bn+ valuations: OPay, a mobile-payments company, which raised funds from investors including SoftBank; Wave, a Senegal-based mobile money network; Chipper Cash, a peer-to-peer payments operator backed by Jeff Bezos; and Flutterwave, which offers payments services to businesses.

If the future of the banking sector in Africa seems promising, then open banking looks set to play a pivotal role, providing third-party financial service providers open access to consumer banking, transaction, and other financial data through application programming interfaces (APIs). As an open-source technology, it allows third-party developers, such as fintechs, to access data held by banks and to develop applications or services based on such data. Through this seamless connection of data, open banking enables customers to access products best suited to their needs, lowering costs, as well as facilitating innovation and inclusion.

Africa’s latent demand for open banking requires the banking sector to adopt fintech solutions. Some of that is already underway. In December 2020, Kenya’s Central Bank released its four-year strategy which highlighted Open Infrastructure as one of its main strategic objectives. In 2019, two large South African banks embraced open banking at the height of the pandemic. The number of South African banks offering open banking services has since grown to six. Meanwhile, South African and Nigerian start-ups TrueID and Okra, respectively, announced they had received significant funding to develop open banking infrastructure.

The UK and EU have already addressed the legislative challenge. At the heart of the Competition & Markets Authority (CMA) Order and the Second Payment Services Directive (PSD2) is customer consent. In Sub-Saharan Africa, the regulatory frameworks that are integral for the operation of open banking in the future, such as data protection laws, have largely yet to materialize.

Meanwhile, a significant part of the population remains unbanked or underbanked across much of the region. Taking South Africa as an example, a great opportunity exists for banks across the continent to become involved in open banking solutions, meeting the needs of the consumers and revolutionising the concept of African banking. African legislators, therefore, need to recognise the enormous potential that open banking creates to facilitate financial inclusion, especially its beneficial impact on access and affordability.

Low costs, accessible services, and an excellent customer experience have long been the core criteria consumers expect banks to meet. But, today they’re not enough. Good value is being overtaken by good values in the minds of many consumers, giving rise to an army of ‘ethical bankers’ who expect more and tolerate less from the financial institutions they partner with.

by Eelco-Jan Boonstra, Managing Director, EMEA, at Mambu

In a survey of more than 4,500 banked consumers globally, Mambu found that the majority (73%) are more likely to use banks that put purpose before profits. In fact, 58% are prepared to pay a premium for financial services that help the environment or local communities, suggesting an overwhelming shift in attitudes supporting Environment, Social and Governance (ESG) criteria not seen in the industry before.

So, how can banks effectively engage this tribe?

Who are ethical bankers?

One of the fastest-growing tribes with the loudest voices, almost half (49%) of ’ethical bankers’ is between 18 and 34. These younger generations account for the largest proportion of consumers globally and have growing spending power, making them particularly valuable customers that banks must cater for to future proof their business.

As consumers become increasingly aware of global issues, expectations of the brands and companies they associate with grow. Whilst this trend is being seen across a collection of consumer finance tribes, almost a third (31%) of consumers identify themselves as part of a cohort of ‘ethical bankers’ whose ethics, values and social responsibility drive their decisions – including spending and saving habits.

Young, well-educated and hungry to make a positive difference, these socially-conscious consumers prefer to pay for access to goods and services than ownership, valuing experiences over traditional assets. And they’re putting pressure on financial institutions to take responsibility for social and environmental issues at both a local and global level.

Service-specific needs

Banks must listen to customers in every cohort to understand what’s important to them or risk leaving them dissatisfied. For the ‘ethical bankers’ tribe, digital accessibility is key – with respondents in this group saying it’s important to be able to use an online or digital banking service to open new accounts (69%) and deposit cheques (51%).

They’re also on the brink of significant milestones possibly accelerated by the pandemic. For example, our research revealed that almost half (46%) of ‘ethical bankers’ have become more likely to buy their own homes over the past eighteen months. Offering seamless services that meet specific needs means financial institutions can add value and position themselves as trusted partners.

Make values valuable

Ethical banking services come at a cost, and it’s easy to assume that consumers won’t pay extra to make them viable. However, research shows, many are open to premium options as long as sustainable values are truly embedded across a business. And that’s where the hard work begins.

There’s no point in preaching about a commitment to solving social injustice or improving environmental outcomes if an action does not accompany it. Simply paying lip service is a waste of time and can erode trust in a brand, particularly amongst customers that prioritise purpose. Banks must be brave and put their money where their mouth is – and trust that customers will do the same.

Make it easy to stay

‘Ethical bankers’ are among the most spontaneous in their spending habits, with 42% describing their spending habits as spontaneous or very spontaneous. But this spontaneity comes with transience and demanding expectations of digital services.

A fifth (19%) of respondents in this tribe said they’ve switched banks in the past 18 months, with over two fifths (43%) claiming they’ve become more likely to make a change since the pandemic began. With services under scrutiny, banks must work harder to earn such custom. Their loyalty certainly shouldn’t be taken for granted. To prevent them from jumping ship in search of a better customer experience, banks should offer an unrivalled combination of tailored services and flexibility they won’t find elsewhere.

Taking social purpose seriously

Every bank claims to be customer-centric, and many are making concerted efforts to walk that talk. But consumer behaviours have changed, and expectations have risen. Banks whose plans for transformation are based on pre-Covid predictions risk being left behind by customers who have found new ways to manage their money during the pandemic.

Banks must take social purpose seriously if they want to survive. Rather than talking about products and services, they need to think about broader values aligning with those of their customers. To remain competitive in a post-pandemic world, they must shift their role from service provider to lifestyle partner – and this requires an intimate understanding of customers’ wants, needs and values.

Get it right and, instead of an expense, purpose can be part of the path to profit.

In today’s globalized environment, with regulatory demands and competition from FinTechs and others, institutions that cannot meet these challenges may not be viable in the long term.

by Nacho González, Blockchain Research Line Expert, Atos

Regulatory demands and competition from FinTechs, disruptors and others, especially in today’s globalized environment, are posing a long-term viability challenge to those institutions that cannot match these agile digitally focused organizations.

With the emergence of blockchain technology, a new revolution is underway: the industry is embarking on transformation, from operational processes to different business markets such as payment services, real estate, insurance, asset management, crowdfunding and lending to leverage the advantages it offers.

Blockchain is the first technology that offers a way to fully manage digital assets in a trusted, traceable, automated and predictable way. What distinguishes blockchain is that each ‘block’ is linked and secured using cryptography. Trust is distributed along the chain and relies on cryptography eliminating the need for a trusted third party to facilitate digital relationships and ledgers.

Enhancing digital finance processes

In the financial services ecosystem, the most significant business areas are clearing and settlement, trade finance, cross-border payments, insurance and anti-money laundering. This is where the Distributed Ledger Technologies (DLT) aspect of blockchain can be applied. In particular, we can point to the Australian Stock Exchange, which has since moved all of its financial asset management to a DLT platform.

Within clearing and settlement, we don’t currently have a common way forward regarding which stages of the lifecycle of a transaction (pre to post-trade, execution to settlement) can be encompassed by the blockchain. Looking at this practically, we continue to see holes such as information sharing with pre-existing legacy systems, compliance and regulatory concerns, along assets segregations. We need to address these issues before we can scale blockchain for such processes.

Yet in the financial processing industry, DLTs provide a compelling set of benefits:

• Traceability. Products and assets can be followed and scrutinized in live time. Once held in a ledger, the data is then immutable; access can be given by those who participate in the system/network, whilst preventing private information from being disseminated to any other sides. In addition, any additional asset data can be provided for use in various manners going with or going from the new owner.
• Clarity. Clear, easy to understand information regarding a transaction will help to encourage customer trust. Balancing transparency and privacy are integral features of blockchain. Identity is hidden within cryptography in the blockchain, therefore the connection of public key identities with individuals who use it is a hard connection to make. Combining this with the means of the data structure within a blockchain (in which a transaction is linked to a public key identity), allows for an unmatched level of transparency with privacy.
• Accountability. Within the chain of blocks, transactions are kept in sequence and indeterminably. This allows for accountability and auditability at every stage, not needing any outside players.
• Security. Every single transaction is verified by the network using cryptographic algorithms, assuring the authenticity and immutability of the information. The users have control over their own assets and transactions also using cryptography. Blockchain is therefore innately secure. Of course, there are theoretical scenarios where a blockchain can be counterfeit, for example modifying one single transaction in more than 51% of the network, but technical limitations make this scenario hypothetical, rather than a real threat to data integrity and immutability.
• Collaboration. DLTs enable each party to easily and securely share finance-related trade data. The level of collaboration (which information each party can share and who can access what) is determined by the configuration of the network/system, so this is a highly customizable solution easily adaptable to any regulatory, technical or functional requirement.
• Efficiency. Transactions are completed between involved parties with no intermediaries. Features like smart contracts provide automation of commercial actions, for example, cutting-edge initiatives such as Etch, an automated smart-contract based platform for wage management.

The beginning of the end of traditional banking?

Most key players in the industry have reacted to blockchain and are deploying DLT applications in their day-to-day operational processes and applying them to different services provided by institutions. These include JP Morgan Chase in the US (with its Blockchain Center of Excellence), Banco Santander in Spain (supporting initiatives such as RippleNet and Hyperledger or with We.trade trading platform deployment) or Mitsubishi UFJ in Japan (with the launch of a blockchain-based payments network).

The implementation and deployment of fully operational trusted and authorized interaction networks among corporations, B2B networks, service providers and financial institutions will be highly disruptive. This does not herald the end of the banking industry as we know it but blockchain, as part of widescale digital transformation, will add significant value. The question is whether traditional players are going to lead this transformation or new players will emerge.

The rapid growth of digital platforms is prevalent across the EU, where a variety of national and supranational regulators are having to pay much closer attention to the financial sector in which this new technology is being deployed.

by Manoj Mistry, Managing Director, IBOS Association

Digitalised banking networks are proliferating as traditional banking services are replaced by high levels of process automation and web-based services. Although such technological innovation in finance is not new, investment in new technologies has substantially increased in recent years and the pace of innovation is exponential.

Among the most notable areas of recent growth, there has been a significant rise in wealth management apps and digital platforms in Europe. Initially driven by younger users, who are more likely to be engaged with wealth apps, the enormous surge in interest has seen more than services for family wealth management as the profile of FinTech users gets older.

Typically, these apps are regulated by the Financial Conduct Authority (FCA) in the UK, and its counterparts in different EU member states. They use Open Banking: the sharing of financial information electronically, securely, and only under conditions to which the customers agree and approve. But inevitably, this surge in FinTech and digital platforms across the EU means that their future use will be driven as much by regulation as by technology.

In March 2018, the European Commission (EC) adopted an action plan on FinTech to ‘foster a more competitive and innovative European financial sector’. The action plan set out 19 steps that the EC intended to take to enable innovative business models to scale up at EU level, to support the uptake of new technologies such as blockchain, artificial intelligence and cloud services in the financial sector, and to increase cybersecurity and the integrity of the financial system.

This was followed by a digital finance package, which the EC adopted in September 2020. This includes a digital finance strategy, legislative proposals on crypto-assets and digital resilience, and a renewed retail payments strategy. Its overall goal is to create a competitive EU financial sector that ‘gives consumers access to innovative financial products, while ensuring consumer protection and financial stability’.

However, the digital finance strategy is only a staging post on the road to further regulation. In September 2021, the European Banking Authority (EBA) published a report on the use of digital platforms in the banking and payments sector in EU.  Although the report outlined steps to enhance the monitoring of market developments, it stopped short of identifying any immediate need for specific legislative changes to be introduced.

But as EU regulators, such as the EBA, become far more active in identifying potential systemic risks posed to financial institutions and individual risks posed to their customers and clients, as well as to financial stability, they will have to regulate accordingly. In drafting legislation at an EU-wide level, and at a national level in each member state, consideration needs to go beyond affording consumers access and ensuring their protection, as well as maintaining financial stability. Regulators will also need to strike a careful balance between regulatory intervention and technological freedom.

In practice, this will of course necessitate creating regulations that are designed to increase transparency, mitigate risks and to guarantee sufficient protection. But while consumer protection must remain paramount, regulators must also ensure that new regulations do not frustrate or impede the pace of technological evolution.

The use of technology in financial services is highly competitive. Just as the EC’s proposed legislative initiatives to govern digital services and content in the EU, namely the Digital Services Act (DSA) and the Digital Markets Act (DMA), aim ‘to establish a level playing field to foster innovation, growth, and competitiveness, both in the European Single Market and globally’, the same must also apply in financial services regulation. The EBA must therefore ensure that new regulations do not hinder the capacity of digital platforms operating in the EU to compete effectively in global markets.