2023

As the ATM is turning 50 this year, it is at the centre of a massive overhaul of the retail banking landscape. Banks have to completely rethink the way in which they interact with their customers while the digital revolution is taking hold of the sector. The speed at which this change is happening is breath-taking: Data company CACI predicts that the total number of mobile app log-ins by banking customers are going to increase from 427 million in 2015 to 2.3 billion in 2020, while the number of bank branch visits is expected to almost half to 268 million per year over the same period.

With the banking revolution right under way, most ATMs today are still based on a ‘cash and dash’ model with limited additional functionality. However, with the right software strategy, they have the potential to become a cornerstone for the omni-channel banking world as the last remaining touchpoints for banks in the majority of local communities.

Our survey of 13 major ATM operators, representing over 250,000 ATMs in 30 countries, shows that the industry is held back by IT challenges, with the largest one being the continuous change in operating systems. Every time a painful operating system change has been concluded successfully, the next one is already looming on the horizon. Software changes are a challenge in and of themselves, but if they also require changes to the core of the ATM IT hardware – the PC –, the costs for what is basically just a compliance initiative can be very high. The industry’s second biggest nut to crack is change management, as rolling out new functions requires long development times and complex integration with the existing, ageing host systems. Finally, with the sophistication of large scale attacks on the rise, security, especially around malware, is a pressing issue that the sector is currently trying to solve.

The fact of the matter is that the ATM industry needs to re-think the underlying architecture of its systems if it wants the ATM to stay relevant in a modern banking world. The answer to this problem can only be to move away from PC-based hardware to a cloud based model, which would give the ATM technology that is out there the breathing space to innovate at the same speed as other channels such as mobile banking.

In a cloud model, the role of the PC-core is reduced to manage the user interface, while the cloud controls the cash dispenser. This provides a higher level of security as the nerve centre is taken out of the ATM and placed within a safe distance. What is more, ATM functionalities could be based on an ‘app’ approach, which would speed-up product development and allow banks and ATM operators to add more features at lower costs.

Rethinking the system architecture under these premises will allow the ATM to develop its full potential rather than continuing to be a simple ‘cash and dash’ facility. Moving to the cloud would be a natural (and potentially vital) development for the ATM industry and the financial services sector as a whole. The first step in this direction would be for operators to agree and implement a standard API, which would provide a set of protocols for building software applications, specifying how software components should interact.

Cloud technology is high on the agenda of the next industry event ATM and Cash Innovation Europe and there are various other initiatives among the industry that are already well under way; all of which shows us that the cloud is the direction of travel for the ATM of the future.

Eric de Putter,

Managing Partner

Payment Redesign

From both a business and a vendors’ perspective, the term ‘client reporting’ is increasingly inappropriate and lacks the necessary ambition to be effective in today’s investment management world. This situation is partially as a result of the terminology that the function uses and the perceived lack of added value within the client reporting process.

Essentially, many of the reporting solutions on the market today are largely designed to solve existing problems, such as the automation, control and governance of the current client reporting and sales information. For almost every firm within investment management though, be they institutional asset managers, retail asset managers, wealth managers and even private banks, the focus should no longer be about client reporting; the emphasis has shifted to improving the client experience: ‘going digital’, using technology to improve the business model and enhance the client interactions with the investment manager.

Client reporting is one facet of an ever-evolving requirement and firms need to stretch their vision and ambition accordingly. In the current operational structure within most investment management firms, one of the areas of the business that is closest to client needs and demands is the Client Reporting team.

Artificial constraints

Due to the fact that this area of the business calls itself ‘Client Reporting’, however, I believe it has become bound by the artificial constraints and limitations associated with the label. In fact, the reporting function is well positioned to expand its role and even place itself at the middle of this process of managing the entire client experience.

In recent times the client reporting label has often been replaced by ‘client communications’, but this is equally problematic since it is not really clear what this term entails – it is so broad as to be meaningless. The reality is that many of the existing vendors and business areas are still providing the same data sets in a relatively uninspiring and restrictive manner. To some extent this is due to the fact that their user community is focused on the production of the current reporting requirements, and managers of Client Reporting departments are rarely focused on future needs and market changes. It is clear to me though that the winds of change are starting to turn.

As we digitise our lives and businesses pell-mell, we are going to have to find answers to some awkward philosophical questions that don’t bother many of us at the moment. Such as – who will the final central bank be – an actual banker or a government bureaucrat? Can do without counterfeiters? And why can’t I choose to make that $120,000 car purchase in good-old soiled bank notes taken from my lifetime’s savings under my mattress?

A friend of mine inherited a small house from his uncle. He sold it and immediately his bank – with which he had had an otherwise happy 30-year relationship – froze his account and demanded to know where the large sum of money in his account was from. He refused to tell them on privacy grounds. They hounded him so much he took all of his funds (and his company’s money) out of this High Street bank and opened an account with Coutts, bankers to HRH. They assured him they would never ask where he got his money from – that would be a vulgar impertinence. #

Born in the USA

It was the USA which started downsizing the face values of dollars in the 1970s as it waged its first war on drugs. Every subsequent war on anything from drugs to Furbies is presaged with a warning on the need to stamp out money laundering and the denominations on our notes get smaller and smaller.

Even though the US Federal Reserve has devalued the dollar over 80% since 1969, it still will not issue notes larger than $100 – in a country which once boasted a $10,000 note. This makes it very difficult to use cash for large transactions, which forces people to use electronic payment methods. And that is its purpose – to track all of our transactions and allow Google and Facebook to make wads of cash selling our data.

But it is not the mighty USA which is winning the mad dash towards a cashless society – it is a little Nordic country called Sweden. Sweden is now famous for more than alcoholic CEOs* and Abba.

Sweden’s supply of physical currency has dropped over 50% in six years. Many Swedish banks no longer carry cash. Virtually all Swedes pay for newspapers, sweets, and coffee electronically. Homeless street vendors use mobile card readers.

And this is where it gets interesting. An increasing number of government restrictions are making sure that the Swedes are happy to be cashless. The excuses from the bureaucrats are familiar… fighting terrorism, money laundering, making criminal transactions more difficult, etc. In effect, these restrictions make it inconvenient to use cash, so people don’t.

Renting the vaults that make you poor

The other sting in the tail is negative interest rates – where the user of the bank has to pay for the privilege of depositing money in the bank – surely the most perverse upending of the movement of market forces by technology. With cash, you can decide to leave your stash under the mattress. As Denmark, Sweden and Switzerland all have negative interest rates and are all in the advance guard in the use of digital currencies that should worry us.

If there is a Nordic push towards stimulating spending by making it punitive to save, then I’m worried even more. I want the choice to do with my money what I want, and I don’t want every penny I spend being logged and making money for the Google’s of the world as tiny bites in the big data picture.

Full digitisation of currency would put the counterfeiters out of business but only on the surface. It would mean that only the hugely rich and the hugely powerful can create or take away our money.  Or print it.

* Ingvar Feodor Kamprad ex-CEO of IKEA and self-confessed alcoholic. Stood down as CEO in 2013.

Many see the money transfer sector as a market that is more than ripe for technological disruption. While it is true that customer demand for digital options to transfer money is on the rise, we need to understand what a truly customer-centric approach to channel strategy looks like. After all, we are aiming to reach as large a range of consumers across the globe as possible. The world-wide rise in financial inclusion and the subsequent changes in how people manage their money plays an integral part in finding the right balance when it comes to our channels.

Technology is necessary, but not sufficient in its own right

Operating with a singular and one-sided channel strategy is no longer a sustainable option in a world where consumers have grown accustomed to an increasingly customer-centric financial services sector. While digital solutions are an integral component for success in the cross-border payments industry, they are not enough to act on their own. A sustainable channel strategy must look beyond technology to deliver the widest range of choice for customers because offering more flexibility allows you to reach the largest possible amount of customers.

The right response to increasing financial inclusion

Despite the fact that money transfer businesses have traditionally been seen as competitors to the banking sector, a key focus for a sustainable and forward-looking strategy should be the development of strong relationships with financial institutions. This is because a growing banking sector across the world means that financial institutions will play an increasingly crucial role in letting people receive and access their money.

Between 2011 and 2014, over 700m people in the world received access to a bank account for the first time. While the current number of ‘unbanked’ people across the world is still estimated to be around 2bn, the World Bank and its partners are working towards reducing this number considerably by 2020: the target is to add another 1bn bank account holders by 2020. For markets like India and China, where currently almost a third of the world’s unbanked population is located, this rise in access to accounts is going to have a significant impact in the way that people handle their money and make use of financial services. In the money transfer sector, we can be certain that the demand for transfers directly into bank accounts will rise steadily over the next few years as a result.

Partnerships with banks as the way forward

Money transfer businesses which have a direct agreement in place with banks are best positioned to take full advantage of the rapidly increasing financial inclusion, because these relationships have an immediate impact on the user experience of our customers. Without a direct agreement in place, money that is transferred to banks disappears into the abyss of the international systems of inter-bank payments for several days. Usually, with a large number of middle-men in the picture, it is hard to predict exactly how long a transfer is going to take, or what amount of money will exactly arrive in the recipient’s bank account due to different exchange rates and fees applied by financial institutions along the way.

Developing direct relationships with banks makes transferring money overseas easier for the business as well as the customer. Money transfer businesses must consider taking advantage of the potential explosion in financial inclusion by going beyond a singular, technology-driven strategy, to a truly multi-channel approach that embraces technology, as well as alternative avenues that customers might use to transfer their money. By partnering with banks, money transfer businesses can complement their sophisticated digital solutions and make their channel strategy more sustainable. After all, we must remember that we are first and foremost a financial service – in other words, we must not forget the ‘Fin’ in FinTech.

Nick Day is founder and CEO of London-based money transfer business Small World FS

Chinese firms Dianrong and FnConn have launched a blockchain-based platform for supply chain finance. Named Chained Finance, the system is the result of a successful pilot and proof of concept.

The industry has been limited by existing technology, the two firms claim, and has only managed to serve around 15% of suppliers needing financial resources. A “vast majority” of the 40 million SMEs in China remain underserved.

Chained Finance will be targeted three major sectors: electronics and auto and garment manufacturing. Dianrong and FnConn are hoping to triple the number of SME supply chain operators with access to funding in China.

“Blockchain is revolutionising the finance industry and offers seamless solutions to any company operating and financing complicated supply chains,” says Soul Htite, Founder and CEO of Dianrong. “The complexity and scale of supply chain finance has posed major challenges in ensuring adequate funding and efficient operations.”

By using the Chained Finance platform, adds Jack Lee, Executive Director and CEO of FnConn, every payment and supply chain transaction can be more transparent, manageable and easily authenticated.

Chained Finance has launched with an initial 40 employees, though the number is expected to grow throughout 2017.

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Ten Nepal-based bank have signed up to use SWIFT’s Sanctions Screening service to underpin their sanctions compliance. The banks join a group 600 strong, built up since the service’s launch in 2012 as the first of SWIFT’s financial crime compliance portfolio.

Sanctions Screening is a hosted utility service that screens financial transactions in real time, according to SWIFT. It holds information up against “more than 30 up-to-date lists of sanctioned individuals and entities from all the major regulatory bodies, including OFAC, the United Nations, and the European Union.”

The service is aimed at small and mid-sized financial institutions as well as corporations and payments businesses.

“SWIFT is a valued and trusted partner in our sanctions compliance efforts,” says Ashoke SJB Rana, Chief Executive Officer of Himalayan Bank Limited, one of the banks to sign up. “Using Sanctions Screening helps us focus on core parts of our business while actively ensuring we are meeting our sanctions compliance obligations, reducing manpower and costs.”

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