2023

The overall progress of a region depends on equal opportunities for everyone without any discrimination or preference. When women of a country are empowered, it drives economic growth and development and creates life lessons for young female entrepreneurs to drive their business ideas. Even though the government has come up with many initiatives to promote entrepreneurship in the country, there are a few hurdles for people (especially women) to put their ideas into action.

bu of Abhinav Sinha, Co-Founder, Eko

Lack of finance options is one of the most crucial roadblocks women entrepreneurs face in India. As the role of FinTech companies has expanded significantly in the past few years, one can expect that these firms will drive entrepreneurship among women in the country. There are different ways through which FinTech firms would enable young women entrepreneurs in their entrepreneurship journey.

Understanding the constraints in access to financial institutions

Financial inclusion is crucial for the entrepreneurship journey of any individual. The concept of financial inclusion refers to the accumulation of savings, accessing financial institutions to invest, and availing various services provided by such organizations. In respect of entrepreneurship, it is crucial to understand that having a business idea and executing the same on any level is a key to this process. Rather than thinking about being a start-up or a unicorn, the most crucial aspect is to get the idea going by initiating a business. However, despite having many ideas, women entrepreneurs fail to execute them at the micro-levels.

Besides being discriminated against gender, financial institutions often do not take women entrepreneurs seriously, and they fail to secure adequate funding to sustain their business ventures. This not only puts brakes on their operations but also poses a significant hurdle in their entrepreneurial journey. Here, FinTech companies can play a significant role in reaching the end-users without the need to have a comprehensive infrastructure (physical).

Hence, from availing of finance to getting investment tips, women entrepreneurs can connect with a FinTech company and start their journeys. Aside from motivating more women to jumpstart their entrepreneurial stints, closing the gender gap will increase 35% of GDP (approximately) and benefit the macroeconomics gains of a country in a significant manner.

Integration of FinTech, financial inclusion, and government initiatives

The government’s efforts in promoting entrepreneurship through easing finance availability are often underappreciated. Several initiatives have started with the introduction of UPI (Unified Payment Interface) along with PMJDY and the Direct Benefit Transfer scheme, due to which FinTech firms have reached almost all parts of the country. Apart from them, the government has set up INR 10,000 crore fund (as a VC) for the MSME sector, allocated INR 20,000 crore to launch a specialized bank (Mudra Bank) for the SME sector, and earmarked INR 1000 crore to empower the financial dreams of start-ups.

These initiatives remove the middleman and facilities person-to-merchant transactions (offline & digital), promoting financial inclusion. With the increased volumes of digital payments and easing the due diligence requirements, FinTech companies have ensured that women will be educated about government initiatives, and becoming a beneficiary of such schemes would no longer be a bureaucratic process.

Improved financial inclusion for women entrepreneurs

Different studies have suggested that the overall trend of savings and investments among women in India has improved with increased usage of mobile apps, wallets, and platforms. With a friendly regional interface, FinTech firms work closely with women entrepreneurs to reduce their reliance on text and western iconography.

Voice-based and banking-plus solutions like savings and health insurance allow people without technical competency to operate businesses (like Kirana stores) more effortlessly. In a way, FinTech companies are promoting micro-entrepreneurship by facilitating small and microfinance, more accessible credit, and quick resolution of their financial requirements and queries. The overall time required to avail such services has reduced considerably, and with UIDAI-supported platforms, women entrepreneurs can use mobile banking solutions (MFS) if integrated with microfinance institutions (MFIs).

Summing up

FinTech companies in India have a significant role in promoting women entrepreneurship at micro and macro levels. These firms understand the challenges female business owners face in executing their ideas. Hence, by providing finance and supporting government initiatives, these FinTech companies will ensure better financial inclusion and address the core business issues that women are often deprived of.

 

The rise of Banking-as-a-Service (BaaS) is a logical next step in fuelling efficiency across existing customer journeys. Rather than diverting buyers to separate channels to complete online purchases, for instance, brands that have already built strong brand recognition can instead cross-sell financial services like credit to already engaged consumers.

by Paddy Vishani, Strategic Partnerships Manager, Yobota

As a result of innovation and growth in embedded finance business models, non-financial brands can now extend credit and other banking services to their customers without having to obtain a regulatory licence – while offering the same protections that come with being a fully regulated bank.

According to PwC, the new revenue potential generated through open banking-enabled SME business and retail customer propositions in the UK was £500 million in 2018. By 2024, Insider Intelligence predicts that this figure will reach £1.9 billion.

Even though the opportunity is compelling, however, there are a few nuances to navigate as banks, BaaS providers and businesses consider forging long-term partnerships.

A winning BaaS partnership

White labelling in financial services is not a new concept; branded credit cards, for instance, have been used by businesses for many years to build customer loyalty. Yet the role of white labelling in the BaaS space is far more involved.

Through flexible plug-and-play application programming interfaces (APIs), banking platform services allow brands to directly tap into the infrastructure of their chosen bank. This means that core elements like risk management, compliance and servicing are all supported.

Importantly, leading BaaS providers will enable businesses to create differentiated offerings, giving businesses the ability not just to implement off-the-shelf banking solutions, but also to curate novel products. Beyond customising the user interface to reflect their brand, the modular architecture of banking platform services empowers businesses to customise, adjust and replace the core components they need at any given point in time. The importance of choosing the right provider thereby becomes apparent.

A BaaS platform must be able to do a number of things. Firstly, it must protect the bank by demonstrating that it can reliably ringfence the clients, their data, and all the processes which will be utilised by different businesses. Core banking vendors should have a proven track record in supporting regulated products, and ideally a leadership team consisting of both technology and banking specialists that are well-versed in regulatory requirements.

The platform must also be designed in a way that offers easy access to all the critical functions provided by the bank: the entry points (usually in the form of an API) must be optimally designed to give businesses the tools they need to realise their vision. The design and flexibility of the architecture are key: BaaS platforms must be extensible and scalable to meet future use cases as customer expectations evolve.

A key component of this is that the representation of financial products should be unbounded. Whether businesses are looking to introduce a variable APR that is dynamically linked to an individual’s credit score, or a savings account that pays interest into an environmental fund, an agile solution is needed to support the long-term evolution of banking products.

Embracing the art of the possible

Embedded banking is increasing the appetite for innovative, tech-driven solutions to solve common pain points across the customer journey. By solving the technical hurdles, BaaS providers like Yobota empower businesses to spin out user-centric offerings that they can run independently.

Sophisticated BaaS solutions should also be able to deliver granular insights into how end customers are interacting with products. Reporting APIs that generate real-time data will enable businesses to continually assess and adapt to industry trends and customer behaviours. Equipped with this knowledge, brands can curate experiences that are truly relevant to their customers’ needs.

The rise of BaaS will no doubt serve to inspire new products and fill unexplored niches in the market. The importance of strategic partnerships, however, cannot be overlooked as banks, providers and businesses set their sights on the new realm of possibilities.

The rise of innovative technologies has made it possible for challenger banks to shake up the market in the last decade. With customer needs changing and expectations increasing, there is a growing trend for smartphone banking; branchless, mobile-only banks with centralised services, ready to compete with established institutions.

by Vince Graziani, CEO, IDEX Biometrics ASA

The term challenger bank is used to describe any banking service provider looking to take on and win customers from the big corporate, or traditional banks. And now banks such as Monzo, Revolut, Chime and Papara, established in 2015, are maturing garnering praise and followers, putting established banks under increased pressure as they battle for the next generation of customers.

US-based start-up Chime is now valued at $14.5 billion and is IPO-ready. In the UK, Revolut— which has more than 14 million customers—is worth more than long-standing high street bank NatWest. Meanwhile Papara, a Turkish banking challenger has grown to eight million users, and is gearing up for European expansion in 2021, with Germany as its first growth market. Also in Europe, Swedish financial service challenger Rocker has received €48 million in equity funding just 18 months after launching. This presents some serious competition to traditional banks around the world.

 Monumental changes in consumer payment habits

Meanwhile, the pandemic has impacted the world’s financial habits. Today consumers are using less cash, making more contactless payments and want to keep a closer eye on spending patterns. As more people move their lives online, digital challengers have been well placed to take advantage of this trend.

According to Ipsos Mori’s personal banking report, challenger banks are cementing their position ahead of some of the biggest financial brands in customer service, showing that innovation and modern ideas are revolutionising the market.

For a new generation of tech-savvy customers, challenger banks also offer something a little more fashionable, with strong branding and messaging, meeting banking needs with a customer-friendly service that fits around them, not the other way round.

Can big banks catch up?

 Big banks have been playing catch up over the past few years. They were late to the game and have retroactively started backfilling their account offerings with spending trackers and notifications. But chasing the features of more agile, mobile-focused competitors isn’t enough to help them thrive in a changing banking world.

In particular, these challengers gain competitive advantage by creating new payment options that reflect customer demand for additional security and convenience. As studies show that payment cards will dominate the banking scene for at least the next decade, bank players need to revolutionise their own payment card offerings to respond to consumer needs.

New and emerging payment options

With consumers concerned about security, convenience and speedy payment options in an increasingly cashless world, big banks must embrace new biometric technology if they are to win their business.

A smart fingerprint authentication payment card already far exceeds the security of PIN authentication. This new generation of on-card fingerprint recognition technology has shown to be more than twice as secure[1] as traditional card payment transactions requiring a four-digit PIN.

Fingerprint data is held securely on the card, not in a shared database, meaning personal biometric data never leaves the card and cannot be hacked, recreated or breached. By linking the user to their card via the unique properties of their fingerprint, banks and retailers can create a payment process that is safe, speedy and highly secure –while demonstrating innovative thinking and future proofing themselves.

Fingerprint authentication is also more inclusive. It removes barriers for those with literacy challenges or memory difficulties because biometric payment cards simply allow consumers to be their own authentication. They can be used in any corner of the world, even in the most remote locations with limited cloud connection.

Biometric cards can also be used to provide direct and unequivocal identification to help the financially excluded open bank accounts and improve their credit scores.

Why embracing new biometric innovation can help gain top-of-wallet status

With the economy slowly bouncing back to pre-Covid levels, fingerprint biometric payment cards offer a safe, secure, hygienic method of payment authentication, providing an additional layer of security and trust in a cashless world. The rising wave of fintech’s and challenger banks is forcing traditional banks to focus on product and service differentiation as they try to compete against more agile entities and retain brand loyalty. Therefore, it’s important now more than ever for banks to embrace new biometric technology to provide their customers with an enhanced customer experience and deliver essential security to their payments.

Biometric payment cards enable challengers as well as incumbents to compete for and gain top-of-wallet status, protect users from fraud and build trust with the consumers of tomorrow. With technology evolving at lightning speed, now is the time for the banking sector to embrace cutting edge innovation and win the fintech play.

[1] Independent field trials commissioned by IDEX Biometrics in 2021 demonstrate the likelihood that a fingerprint biometric payment card incorrectly accepts an unauthorized user was less than one in 20,000, compared to a one in 10,000 chance of correctly guessing a user’s four-digit PIN.

A few years ago, it was fashionable to talk about ’emotional banking’, but this concept seems to have been quietly dropped. Perhaps we need to rethink the idea—the key is embedded payments and their role in ‘emotional finance’. Fintech has made the staid financial services industry infinitely more exciting, at least for those who watch the sector. But has this excitement filtered down to consumers?

By Alex Reddish, MD, Tribe Payments

People are driven by emotions, even when they don’t realise it. As consumers, gut instinct and personal preferences can play a huge part in our purchasing decisions.

The power of a brand can have far more influence on purchasing decisions than many other factors. If people feel warmly towards a brand, they are happier to engage with it. There are many reasons why Apple is one of the most successful companies in the world, but it’s undeniable that the brand is a big part of it. People see the Apple logo as a sign of quality and innovation and are happy to pay a premium for their goods. The iPod was not the first mp3 player, yet it became synonymous with the technology. Consumers (in general) love Apple. Who else could they learn to love?

Can people learn to love financial services?

A few fintech brands have made a particular effort to engage with their customers. Zopa posts regularly to Instagram with easy-to-follow, friendly advice on money matters. Business provider ANNA has developed a range of child-like illustrations and Klarna churns out a combination of zany creativity in its adverts and a steady stream of helpful tips in social media.

For all this, including the slick apps, welcoming graphic design and friendly customer service, financial service providers are still going to struggle to be as beloved as, say, Nintendo or Nike. People need to trust these providers. They need to know that they can have faith in their systems and services. Once this trust is built, can it really be developed into genuine brand affection…?

Embedded payments and the rebirth of emotional finance

Embedding payments means more convenience for customers. By making payments ultra-convenient and invisible, consumers are happier because everything happens with zero fuss or effort, and businesses get to reap the benefits. There’s also the opportunity for businesses to offer financial services that reinforce the relationship between the business and consumer, as well as delivering potential new revenue streams.

Embedded payments link merchants directly with their customers, enabling them to be part of that transaction or moment. These payments allow providers to build customer relationships at that point of need, helping build trust and develop a meaningful relationship.

But we shouldn’t see embedded payments as the endgame. It’s tempting to think that, once the payment is invisible, there is nothing more that can be done. There is the potential to create better links with customers—and perhaps even create the sort of emotional connection that other brands enjoy. This is emotional finance.

Creating better relationships is contingent on having a better understanding of the customer journey… but not the customer journey as we usually mean it. Rather than the customer’s journey through a payments system, we mean their journey through life. Priorities shift and change, and even minor decisions can mean big changes in spending. A new child, a new home, or even a new hobby can mean an abrupt shift in priorities–understanding these changing preferences and reacting to them can open the door to building better loyalty.

Right now, certain music streaming services offer deals for two people at the same address – but consumers have to proactively adopt these and link their accounts. What if a service could do this with a certain level of automation? What about other services that would be helpful to adapt without changing needs? The most common embedded payments example is paying automatically when taking an Uber or another taxi… but what about the other journeys (real and metaphorical) we take in our lives?

The key to this is, of course, data. Data means that we can create better services – more personalised, more convenient. But it’s not just about making sure we tap into the broadest range of data available. Timing is very much a factor, perhaps the most important. Instant access to data is required to make the fairest, most accurate decisions.

When we consider how much change we’ve all gone through in the last year or two, financial data that is 18 months old is likely to be very outdated, and the quality of customer data will degrade quickly over time. We need to work with the freshest data to make sure the end product is one that consumers will want.

Ultimately, consumers will pull us in the direction they want to go, no matter how much we think we can ‘push’ new products and services to them, adoption is down to the customer. Creating emotional finance – a connection through loyalty and context is key – embedding finance to make things convenient is not, on its own, enough.

The sale of a kinetic 3-D video sculpture called HUMAN ONE earlier this month at Christie’s in New York was a milestone in the art world and not a bad day for the artist, Mike Winkelmann, better known as Beeple. The artwork sold for $29 million to a buyer in Switzerland, $14 million above the guide price.

by Adi Ben-Ari, Founder and CEO, Applied Blockchain 

What makes this piece different is that the video sculpture combines physical and digital technology. It came with an accompanying non-fungible token (NFT) representing the underlying digital assets. The artwork of an astronaut-type figure walking through an ever-changing backdrop draws on videos with an NFT on the Ethereum blockchain. The work was available for purchase using Ethereum.

The sale marks a coming of age of sorts for NFTs. To illustrate the speed at which this phenomenon has developed, even Beeple said he was unaware of NFTs a year ago. Since then, he’s sold around $100 million of digital NFT artworks – in March he sold a work entitled “Everydays: The First 5000 Days” for $69 million, the first of its kind.

NFTs are unique, digital certificates stored on a blockchain. They are a powerful tool to establish and demonstrate a type of ownership, particularly for digital assets which can be so readily copied. The non-fungible element reflects the uniqueness of each digital asset and the different values of each. Fungible assets include pounds, dollars, Bitcoin and other similar instruments that are identical and interchangeable. NFTs are generated using a “smart contract”, which is basically coding stored on a blockchain.

Digital art fuels public awareness of NFTs

What’s clear is that since NFTs entered public consciousness early in the year, they have seen a meteoric rise. Trading volume in the third quarter exceeded $10 billion, up 38,000% on the previous year. What’s more, artists, athletes and gaming developers are increasingly investing in blockchain technology to provide their audiences with unique digital assets, meaning that numerous NFT marketplaces are opening every month.

Cryptocurrencies have been around for over a decade – borne of the 2008 financial crisis – but only in the past three or four years have they started to become more mainstream. The NFT market has piggy-backed on that luring those investors who are seeking out the next new thing – the next big alternative asset class offering the potential for big returns. Blockchain is the engine for both instruments.

Blockchain records all transactions in a way that is indelible – records that are much harder to change or hack. As well, it is decentralised, meaning that control of security moves from a centralized entity, such as an individual or organisation, to a distributed network of people or entities. The technology demands transparency, accountability and puts the power into the hands of its users. That’s one of the appeals of NFTs.

One of the features of Ethereum is that it allows developers to implement so-called smart contracts. These smart contracts are essentially packets of code that may also define a digital asset and confirm that the asset as individually unique, traceable and verifiable. All NFTs have smart contracts attached to them.

Iron-clad indestructible proof of ownership

To date, NFTs have generally been linked with the art world. The value lies in the ability of the technology to prove its origin with absolute technical certainly. NFTs feature iron-clad, indestructible proof of ownership along with provenance that will last as long as the blockchain itself (forever?). In the future, every digital artwork is likely to have an associated NFT. The liquidity of an NFT certainty adds value – in the art world, that can be worth tens of millions.

An additional attraction of NFT marketplaces for artists is that they are cheaper. In the traditional art world, a gallery could easily take 30% or more of the takings on an art sale. NFT marketplaces typically charge less. This enables the artists to earn more, in particular on multiple and frequent secondary market sales, which matters because most are not as commercially successful as Beeple. NFTs also enable artists to connect directly with their customers as each purchase is documented on the blockchain and the creator is clear.

Collectors and investors are now scrambling to add such digital collectables to their portfolios, which is having a significant impact on the wider token and digital asset market. Digital collectables have driven many headlines, but the real-world application of NFT technology is even broader, extending across multiple sectors. Businesses, regulators, governments and authorities all, in different ways, stand to benefit if they are able to harness the potential of NFTs. In short, NFTs are not a fad.

So where next? The security and efficiency of smart contracts enable NFTs to be used as tickets for concerts, safeguards for digital identities or digitally tradeable representations of physical collectables and luxury items while those are in custody.

In the music industry, with the decline of physical sales and digital downloads, music artists often rely on income from streaming, which tends to reward intermediaries, such as the streaming platforms, and record labels disproportionately. NFT’s enable fans to engage directly with the artist through asset and financial transactions.

With collectable NFTs, artists gain the opportunity to establish a direct relationship with listeners and fans, enabling them to benefit financially. They also enable the payment of royalties to the original content creators – regardless of where or how the sale of NFT items occurs.

Other NFT applications are where the interest lies

One particularly valuable feature of NFTs is that they bring liquidity to previously illiquid assets. This happens through enabling ownership to change via digital platforms, especially those with global reach. Trading can be extremely efficient, requiring fewer intermediaries than traditional markets as a result of using digital guarantees. Innovative and efficient blockchain-based financing options in the form of DeFi (decentralised finance) are beginning to accept NFT’s as collateral for lending.

NFTs could also allow fractional ownership in assets such as property. This would mean property owners could unlock value from their properties and then raise funds without the assistance of multiple parties. Indeed, this approach could apply to the sale and exchange of businesses, or investments in sports star equity, whether in part or in their entirety.

Looking forward, blockchains need to become more interoperable with one another, so that an NFT minted on one blockchain is transferable to another blockchain. This is of growing importance, in a similar way that global mobile phone connectivity and then mobile app interoperability was such a big issue a few decades ago.

Applied Blockchain has built major NFT marketplaces for some of the world’s leading artists for both digital and physical art, as well as numerous other blockchain applications. NFTs offer a way to release inherent value and in doing so they create liquidity. It should be no wonder NFTs are generating such excitement across so many markets.

The payments industry has continuously evolved over the last few decades and the pace of change has only increased. Technology has contributed significantly to delivering payment services to the consumer. These changes are driven by the need to increase the lending portfolio reliably with a seamless customer experience.

by Aravind Irodi, Senior Vice President, Head of Practices, Attra, a Synechron company

The recent incarnation of Buy Now Pay Later products – as available against other financial services solution such as credit cards — to a standalone solution financed by FinTechs has taken the industry by storm. This has led to a number of new players, such as Klarna and Afterpay amongst others, achieving significant growth in lending volumes. These FinTechs are lending to the new age population and taking market share away from the traditional card players on short-term credit. The FinTechs are underwriting the risk and it has shown to be a profitable initiative for the now larger players. Additionally, other well-known retail platforms (like Amazon.com and Walmart) have recognised the vast opportunity and are implementing this phenomenon for their customers.

Traditional payment service providers (a.k.a. card issuers) have an opportunity to capitalise on their existing customer relationships to provide revolving credit in a Buy Now Pay Later fashion, independent of card networks. They can use their existing accounts receivable infrastructure to provide this service with changes at the point of sale (POS) to provide the payment option and direct settlement with merchants. These payments providers possess the added advantage of having an existing customer base and credit assessment infrastructure in place under which to make credit allocation decisions. Accelerated deployment of market-ready solutions is the key to ensuring that market share is retained as FinTechs disrupt the marketplace and bigger, steadfast participants seize the opportunity.

In pursuit of superior seamless payment experiences

There are also innovations happening on the merchant side to make payment experiences seamless. A key global trend across large merchants in recent years has been to provision an omnichannel experience to its customers. This is now coming of age, with technology solution providers building out solutions to cater to this need.

Customer touch points have evolved with payment options, such as contactless cards, wallets and QR code-based payments. Each of these payment options have penetrated markets to varying degrees across the globe. Contactless payments have been mainstream in Europe and Australia for the last decade whilst playing catch-up in other markets. QR code payments have had significant acceptance in the Asia Pacific market and are now finding greater acceptance across the globe. The form factor is also evolving with the usage of wearables, such as smart watches and voice enabled payments from devices such as Alexa, finding their way into the payment ecosystem. Digital wallets, an innovation that has been in existence since the emergence of PayPal, is now gaining market share in super app ecosystems with each of the major players coming up with their own proprietary wallets. Card issuers are also moving towards a digital form factor, particularly for their prepaid cards.

In an attempt to significantly improve the shopping experience with a completely seamless payments interface, Amazon has now pioneered ‘just walk out’ technology under the brand Amazon Go. It is now offering this technology to other retailers with the market expected to evolve in the near term. These innovations are leading to the co-existence of various payment options across the globe. The hybrid ecosystem is largely due to market segmentation, not just by geography but also customer demographics and investments for large scale deployment in larger markets.

Constant ecosystem technology updates   

These continued changes in improving customer experience and making payments seamless has meant that merchants and their technology service providers must constantly keep their systems up to date. Brick-and-mortar stores have a wide variety of POS infrastructures and increasing payment options mean constant updates to this ecosystem. The online payment options are relatively easier to change. Aggregated payment gateway service providers enable a faster deployment of the latest technologies for online payment service providers.

We foresee continued evolution of payments with an increasing focus on customer comfort and making payments as seamless as possible. This would require financial services organisations to enhance their technology infrastructure in order to support these advancements and in keeping pace with market leaders. The traditional payments service providers, such as card issuers, need to have a forward-looking business team looking to launch new product options for consumers and, equally as important, is to have a technology team to enable a fast time to market.

While disruption from the pandemic has highlighted many opportunities for development across multiple industries, it has especially emphasised the need for digital transformation within the financial services market.

by Hans Tesselar, Executive Director, BIAN 

At the beginning of the pandemic, financial institutions realised what it meant to be truly digital. Research from EY found that 43% of consumers changed the way they banked due to Covid-19 favouring a more digital approach. Almost overnight, banking organisations were forced to shift their focus towards becoming more agile, resilient and, above all, digital.

Despite the importance of transformational efforts, the financial services industry continued to come up against obstacles, highlighting the need for urgent industry action.

Digital-First Customer 

The financial services sector has realised that without the comprehensive digital infrastructure necessary for today’s environment, they are unable to bring services to market as quickly and efficiently as they would like – and need. The extensive use of legacy technology within banks meant that the speed at which these established institutions could bring new services to life was often too slow and outdated.

This challenge is also complicated by a lack of industry standards, meaning banks continue to be restricted by having to choose partners based on their language and the way they would work alongside their existing ecosystem. This is instead of their functionality and the way they’re able to transform the bank.

To move forward into the ‘digital era’ and continue on the path to true digitisation, banks need to overcome these obstacles surrounding interoperability. Additionally, with today’s digital-first customer in mind, financial institutions need to take advantage of faster and more cost-effective development of services. Failing to provide these services may force customers to take their business elsewhere.

One thing is certain, consumers will continue to prioritise organisations that can offer services aligned to both their lifestyle and needs.

Coreless Banking 

The concept of a ‘Coreless Banking’ platform is one that supports banks in modernising the core banking infrastructure.

This empowers banks to select the software vendors needed to obtain the best-of-breed for each application area without worrying about interoperability and being constrained to those service providers that operate within their language. By translating each proprietary message into one standard message model, communication between financial services is, therefore, significantly enhanced, ensuring that each solution can seamlessly connect and exchange data.

With the capacity to be reused and utilised from day one, and the ability to be used by other institutions, Coreless Banking provides these endless opportunities for financial services industries to connect, collaborate and upgrade.

The Future is Bright

It’s clear that the world is facing a digital awakening, and banks are eager to jump on board. Ensuring that the rapidly evolving consumer has everything they need in one place has never been more essential, and the time to enhance the digital experience is now.

Trade surveillance departments are under intense pressure from regulators to catch trade market abuse and fraudulent activity. But monitoring is becoming increasingly complex.

by Paul Gibson, Business Development Director, KX

Financial institutions must monitor activity relevant to their specific business, this means checking for market abuse, fraud, market disruption and fair practice as well as more malign abuses such as money laundering to support criminal activities like terrorism and people trafficking. This often means analysing vast amounts of both historical and real-time data, in a variety of formats from trade data to electronic communications. Analysts are becoming weighed down by large amounts of alerts and investigations, many of which prove to be unnecessary when other factors are considered.

To deliver a successful trade surveillance programme that satisfies the rigour of the regulators and the efficiencies demanded by the business, a consolidated approach is required. It must be effective across all lines of business for the detection of emergent, systemic and often unknown risk, and take a proactive approach to make sense of all of the interactions, dependencies, changes, patterns and behaviours across the entire trade lifecycle.

Cross-Product Analysis

Organisations need a platform that can process vast amounts of data from multiple streams in real-time, allowing users to make decisions on alerted behaviours much more effectively with significantly greater efficiency. This means using cross-product analysis to identify errors, automated techniques to reduce false positives and machine learning to extract insights from both historical and real-time data.

Traditional instrument-by-instrument trade surveillance techniques do not typically extend their analysis to related products. This means that in certain areas, such as credit and rates, the links between the topics and how they are affecting one another go unseen. This is opposite to risk management techniques across the same technologies where trade dependencies are closely monitored.

As such, it is important to incorporate risk management elements, such as benchmark and sensitivity measures to help identify potential abuse over a range of instruments. This enables products to be broken into their risk fundamentals and effectively ‘look through’ to the underlying securities in an analysis. In looking for evidence of manipulation of a Financial Risk Advisor (FRA), for example, the analysis may extend to monitor both futures and interest rate swaps too.

Reducing False Positives

The more information available to businesses means the more insightful judgements can be made. In regard to false positives, the presence of surrounding data can help contextualise results by automatically classifying high volumes of alerts. Analysis can then determine which are material and which are not. False positives reduction techniques fall into three areas:

• Data Filters – Filtering out specific data or activity that may not be applicable. For example, excluding immediate-or-cancel (IOC) orders from Spoofing profiles.
• Use of Dynamic Thresholds/Benchmarks – Replacing static thresholds with automatically adjusting parameters that reflect evolving market conditions and changing behaviours, not only of individual traders but across the market.
• Alert Feature Overlays – Including surrounding factors for context in assessing alert severity. For example, factoring in change in portfolio concentration when monitoring potential insider trading.

When used together, these factors help avoid unnecessary and time-wasting alerts that distract analysts from the more important and pressing investigations. Thereby, optimising both operational efficiencies and effectiveness for mitigation of true risks.

Future of Trade Surveillance relies on Machine Learning

From calibration to error reduction, machine learning enables a variety of business practices to be improved. Detection rates can be continuously refined using a blend of supervised learning, unsupervised learning and feature extraction techniques from the historical data store.

Supervised learning uses analyst feedback and assessment of historical results to train models and improve their accuracy. Unsupervised learning works on its own to discover the inherent structure of unlabelled data, using techniques like One-Class Support Vector Machines (SMVs) to detect anomalies to help classify results based on distributions and similarities.

SVMs establish normal behaviour by learning a boundary and then adding a score to the results, based on their distance from that boundary. This adjustment can then guide analysts on what investigations to prioritise. Indeed, the benefits of AI and machine learning are well documented, but their application for improving detection rates in trade surveillance is limited.

Regulators are still hesitant to allow machines to determine whether an activity is suspicious or not. This means that the majority of what we are seeing is a supervised learning approach. However, the regulatory landscape continues to evolve and the demand for real-time decision-making is mounting. Therefore, organisations will need to make a shift in mindset and capitalisation of narrow AI with unsupervised machine learning if they are keen to detect fraud effectively and accurately.

As a result of the ever-evolving market abuse tactics being detected, and which need to be prevented, the requirements for strong trade surveillance are more demanding now than ever. For firms, this increased complexity requires them to adopt a consolidated solution that delivers accurate insights when it’s most valuable – at scale both historically and in real time, enabling users to analyse data at a breadth and scale that wasn’t previously possible.

The flexibility of a high-performance streaming analytics platform is a game-changer for real time intervention where necessary and the timely flagging of abnormal behaviour based on large amounts of historical data. By using this technology, firms can take a proactive approach in their response to abnormal behaviour in as quick as microsecond, instead of reacting when it is too late. By doing so, firms can work to improve detection rates and make significant savings through fewer false positive cases and ensure operational efficiency is met.

Unsurprisingly, building a digital bank – either from scratch or from an existing infrastructure to become truly digital – is no mean feat, and there are plenty of obstacles along the way. (We’ll come onto those later).

by Max Johnson, Global Head of Business Solutions at Fidor Solutions, a Sopra Banking company

Meantime the number of challenges that legacy banks are facing is stacking up: Keeping pace with new and changing regulations; loss of market share caused by struggling to meet the needs of digital and non-digital native consumers alike; maintenance of outdated systems. They’re all issues that banks have to contend with.

And while new industry entrants are also up against problems of their own, they’re often immune to some of the issues faced by their incumbent competitors.

To remedy this, many legacy banks look to their modern, more agile competitors for inspiration, and digital transformation is often at the heart of their strategic response. By digitising their existing processes – and doing so at speed – and offering customers truly digital, innovative products and services, they hope to beat the digital banks at their own game.

Likewise, non-legacy bank organisations sense an opportunity. The number of new digital banks being created has risen exponentially in recent years, quadrupling from 60 worldwide in 2018 to 256 in January of this year.

Nevertheless, whether it’s legacy banks looking to accelerate their digital transformation or new industry entrants interested in building something from scratch, the question remains: How can you build a digital bank?

What is a digital bank?

At a quick glance, a digital bank is simply an organisation that provides traditional banking services via a computer or mobile device. Indeed, the core products and services offered by digital banks don’t necessarily differ from those of their incumbent competitors. However, there are some key differences that set digital banks apart.

For a start, digital banks tend to target digital native customers who, oftentimes, feel neglected by legacy banks. Some important customer needs met by digital banks include:

• Transparency: Digital banks rarely have hidden or excessive fees
• Experience: Digital banks typically offer fast and easy-to-use services and support
• Accessibility: Digital banks often allow their customers to access their services at any time, from anywhere

Targeted customer-centric service is at the heart of what makes a digital bank. Rather than resting on their laurels, digital banks are known for continuously adapting their value proposition to better meet the needs of the market. Fidor bank, for instance, has focused on customer engagement by giving customers a voice in how the bank is run, by “discussing the future interest rates, or naming the current account card that the bank will use.”

Such an approach has reaped rewards, even during the pandemic. In the US, for instance, the number of customers served by digital banks rose by 40% from 2019 to 2020, per a recent Forrester report.

By offering user-friendly and relevant services, digital banks can set themselves apart from their incumbent competitors. It’s both the definition of what makes a digital bank and part of the key building blocks required in building one.

Challenges in building a digital bank

It’s easy to say that building a digital bank is the future, but there are of course challenges.

First and foremost, acquiring customers, deposits and active accounts is always the biggest hurdle to overcome, especially getting money into the system to begin with. Offering prospective customers with USPs and attractive products and services (such as those mentioned above) is a great place to start, but building such a strong portfolio can be time consuming and costly.

There’s also the red tape to bear in mind. While it differs from region to region, banking is an extremely regulated sector, and there are plenty of administrative hoops to jump through. This can be a lengthy and expensive process, which is why many emerging digital banks often partner with legacy banks. The US-based digital bank Chime, for instance, partnered with Bancorp, who provides the banking license and deposit insurance.

Of course, legacy banks wishing to go digital are less concerned with banking licences and building a customer base from scratch, but they do have different challenges to overcome.

Many legacy banks have cultures and technologies that are difficult to change. Becoming truly digital means having agile technology capable of continuously adapting to an ever-changing market, as well as having an open culture of change within the organisation. And in the same way that creating the building blocks of a digital bank can be time consuming and costly, so can implementing the change to go truly digital.

Building out a roadmap

Clearly, launching a digital bank is far from easy. There are plenty of boxes to tick and potential problems to be navigated. Furthermore, launching a digital bank is by no means a guarantee for digital success. The market is becoming increasingly crowded, and plenty of digital banks have already failed, including Bo by Royal Bank of Scotland, Finn by JPMorgan Chase and Greenhouse by Wells Fargo.

It’s therefore vital to approach building a digital bank in the right way. We believe that approach starts with putting together a roadmap. On a macroscale, this involves outlining the objectives, mission and vision, and identifying the short and long-term values to be achieved. On a more detailed level, it’s about research and testing – identifying target segments, understanding customer needs and pain points, and using that data to create high-value USPs.

Building iteratively on this type of approach – including listening to and acting on customer feedback – gives organisations the best chance to succeed.

Of course, putting together and following a roadmap toward building a digital bank is, in itself, not self-evident. Organisations need to understand the intricacies around it, such as customer journey, technical architecture, the associated costs and licenses involved. That’s why having the support of an experienced and trusted partner during this process is crucial.

As is becoming increasingly the case in the banking world, partnerships here may be the key to survival. Banks and organisations need to seek out tried-and-tested expertise in order to help them build out their digital roadmaps, as going alone will not be successful.

IBS Intelligence partnered with Sopra Banking Software to promote the Sopra Banking Summit, which took place 18-22 October 2021. The summit tackled the biggest issues in the financial sector. This weeklong festival of FinTech touched on the hottest topics in financial services and highlighted the new paths industry leaders are taking.

This article was originally published here.

If corporate finance leaders were focused last year on reducing the cost of operations, to ensure their enterprises survived the biggest business challenge in a generation posed by a global pandemic, what’s changed today, is finance decision-makers are being challenged now more than ever, to prioritise revenue growth through new technology and business models.

by Gavin Fallon, General Manager at Board

This return to an emphasis on transformation, as well as managing and restoring enterprise financial health, creates a whole new set of challenges, and pressures on finance leaders which have wide-ranging implications across the complete office of finance function.

The C-suite demands acceleration of the digital enterprise, growth, and new genuinely transformative business models as a number one strategic priority. They expect their finance leaders to play a crucial role in making this all happen. The Resurgent Finance Leader research amongst 600 finance leaders worldwide, explores the transformation of the office of finance, provides a view from the top and evidence into how well global finance leaders are making progress on these strategic priorities and expectations today.

If the C-suite expect digital technology to transform their industries and are racing to accelerate these plans, then it’s clear the office of finance will have to rise to the challenge too and transform fast, in parallel with the acceleration of the digital enterprise. These research findings show how finance leaders know they have the backing of management to do so, and how business leaders are ready to embrace the finance team, as a key player to support business goals.

The vast majority (94%) of global finance decision-makers surveyed believe their organisation’s executive leadership are willing to completely rethink traditional finance roles and responsibilities. Further reassurance is taken from the fact that the same proportion (94%) believe their executive leaders are willing to support the office of finance, to become more strategic and accelerate the digital enterprise by enabling the function to become the hub of the of the most important strategic asset to the business: data.

The research findings reveal now is the time for finance leaders to back their own transformational capabilities and take on a more strategic and valuable role in the business. These finance decision-makers know the office of finance could be potentially automated out of existence unless it makes the leap from background support function to strategic hub for vital data. Perhaps then, it’s no surprise that most finance leaders agree, it’s time to accelerate the change from being a scorekeeper to performance driver, and finance should be the natural home for all data.

The report also shows, however, that whilst finance leaders worldwide know now is the time for the office of finance to make the transformational leap to become the strategic hub for driving more value from their data, not all of them are completely convinced their office of finance is entirely ready to drive business decisions, profitability, and performance.

Just under half (47%) of all global finance leaders surveyed are totally confident in their office of finance’s capability to capture valuable insights which drive business decisions and profitability. The report identifies 62% of finance leaders who don’t believe current finance reporting enables them to totally accurately project performance and adapt forecasts in real-time to reflect changing market conditions. Perhaps more concerning, is the report’s evidence highlighting most finance leaders (81%) believe how their office of finance uses technology to influence business decision-making and drive strategy needs a complete overhaul OR a lot of improvement.

Our research suggests that progressive finance leaders know a change is needed, with more sophisticated insights and planning capabilities to be able to change and keep on changing, plan for the unexpected, and generate new meaningful insights, beyond traditional budgeting processes, to plan and be ready for new opportunities when they arrive. The research also shows that despite receiving the validation of their organisations’ leaders, who are ready to embrace the finance team as key player to support business goals, finance decision-makers believe transformation of finance needs to be reflected in wider finance team skills and culture.

Just under half (44%) of all finance leaders surveyed are totally confident their organisation has the right technical skills and talent within the business to ensure technology is driving better business decisions, and a huge majority (92%) of senior finance decision-makers worldwide believe that company culture should encourage the finance team to be creative, curious, and rebellious, allowing them to think quickly and constantly challenge the status quo.

There’s a huge opportunity for finance decision-makers who can enable the winning combination of transformative skills, culture and technology across the office of finance to unlock the value of vital data insights, and play a strategic role in shaping the digital enterprise. At the same time, it shows there are still gaps to fill when it comes to pulling all these vital elements together.

Thankfully, it doesn’t have to be this way. The opportunity exists right now for finance leaders to fill these gaps, starting with democratising access to intelligence, analytics and planning delivered via the cloud, to provide a genuine empowering and transformative experience across finance teams, utilising a winning combination of technology, skills, and culture, to transform the office of finance today and lead the digital finance function of the future.