January

Trade is the engine that powers development and competitiveness in the global economy, thereby encouraging fairness, creativity, and productivity. When trade flows in a rules-based system, jobs, wages, and investment accelerate immensely.

By Swati Babel, a cross-border trade finance business specialist, and VP at Triterras

Trade financing supports trade at every level of the global supply chain. Trade finance makes ensuring that buyers get their products and sellers get their money by supplying liquidity, and cash flows, and reducing risks. Simply expressed, trade finance is necessary for the cross-border movement of products and services.

With the Global Trade Finance Market estimated to reach $85.85 billion by 2027, growing at a CAGR of 7.06%, it becomes an integral part of every country’s economy. The world’s vast domestic market and a large pool of skilled workers make trade finance an attractive destination for foreign investors. However, the complex regulatory environment and lack of access to financing restrict the expansion of business operations across various markets.

However, the emergence of FinTech platforms over the years is paving the way to simplify and seamlessly align the trade finance industry. FinTech platforms are providing much-needed solutions for businesses by offering innovative financing products that are tailored to the needs of enterprises. These platforms are helping businesses to overcome the challenges they face in accessing traditional bank financing, and they are playing a key role in promoting economic growth and development. The platforms provide businesses with the financing they need to grow and expand their operations and also help the businesses manage and improve their financial planning.

The role of FinTech platforms in the trade finance industry is to provide an efficient and cost-effective way for businesses to finance their international trade transactions. The platforms offer several advantages over traditional banking products, including:

• Access to capital: Fintech platforms provide businesses with access to capital that they may not be able to obtain through traditional banking channels. This can be particularly helpful for small businesses and startups that may not have the collateral or credit history required by banks. Moreover, Fintech platforms provide businesses with enhanced access to funding, which can be used to finance trade transactions. Another key advantage of fintech platforms is their ability to connect borrowers and lenders from around the world, which gives borrowers greater access to capital. In addition, fintech platforms usually have lower transaction costs than traditional banks.

• Flexibility and Cost Effectiveness: Fintech platforms offer more flexible terms than traditional bank loans, which can be important for businesses that have the irregular cash flow or are expanding into new markets. Fintech platforms offer flexible products and services that can be customized to meet the specific needs of businesses. Fintech platforms offer cost-effective solutions that can help businesses save on costs associated with financing trade transactions. Various fintech platforms have relationships with multiple lenders, which gives them the ability to get customers the best possible terms for loans and can often provide more flexible repayment terms than banks. This means that businesses can choose a repayment schedule that works best for them, instead of being tied into a rigid repayment plan from a bank.

• Agility and Efficiency: Fintech platforms typically offer a faster and more convenient application process than banks. This can be critical for businesses that need to quickly obtain financing for time-sensitive trade transactions. Fintech platforms for trade financing are a lot faster than going through a bank or other financial institution because the process is often much simpler and there is less paperwork involved. Fintech-led events and activities such as the Singapore Fintech Festival also enable an ecosystem of networking and partnerships. Because of these reasons, banks and financial institutions with sufficient capital often team up and participate with the Fintech platforms for lending/co-lending opportunities. Additionally, they also enable businesses to streamline their trade finance operations and improve overall efficiency. Innovative solutions such as AINOCR or Electronic B/L help in digitizing analog data, such as paper documents, bills, etc. These platforms provide valuable data and analytics to help businesses make informed decisions about their trade finance need and help businesses streamline their operations by automating key processes.
• Enhanced security: Fintech platforms often utilize cutting-edge security features, such as blockchain technology, which can provide an additional layer of protection for businesses and their customers. Many platforms use such next-gen technologies to protect borrower information and ensure that transactions are processed securely. This can give borrowers peace of mind when taking out a loan or making a payment.

FinTech platforms are playing an increasingly important role in the trade finance industry. By providing a digital infrastructure for the entire supply chain, from producers to retailers, they are making it easier for businesses to connect and trade with each other. This is particularly important in the current climate, where businesses are under pressure to move faster and be more agile. FinTech platforms can help them do this by streamlining processes and reducing costs. While credit assessment and due diligence should be carried out manually to avoid Trade-based Money Laundering, however for everything else, Fintech platforms are changing the landscape of Global Trade Finance.

Collaborative partnerships can remove barriers to SME borrowing, in turn boosting the global economy. In an already challenging market for businesses of all sizes, SMEs are facing the additional strain of being unable to access the working capital they need to manage cashflow, take advantage of growth opportunities or help them get through quiet periods.

by Martin McCann, CEO, Trade Ledger

The good news for SMEs – and the banks wanting to provide them with a better solution – is that the technology to resolve these pain points already exists. Companies like Trade Ledger provide the technology that lenders need in order to offer businesses fast, easy access to working capital – worthy of a digital economy.  A good example of how that is working in reality is our partnership with HSBC.  Working together, we created a digital solution that cuts the approval process for new receivables finance from up to 2 months, down to within 48 hours.

Utilising the interconnected ecosystem

Even the world’s largest commercial bank cannot do it all in-house, instead seeking agile, enterprise technology partners to fast-track digital transformation strategies and start adding value to customers sooner. We call this collaborative innovation.

Such partnerships are nothing new. Indeed ‘partnership’ seems to be something of a buzzword in the financial services industry today – thanks in part to open banking, but also Covid-19 forcing many to seek alternative solutions quickly in a time of crisis. It is encouraging to see banks, FinTechs and other payment services providers increasingly looking to build partnerships within the financial ecosystem, for the mutual benefit of both organisations as well as their underlying customers. Utilising purpose-built solutions of other providers, financial institutions of all sizes can get new solutions to market more quickly and at lower cost, helping them to remain highly competitive.

Another example of innovative collaboration is the way in which we work with Thought Machine, the cloud-native core banking technology provider. Together, with Trade Ledger’s loan origination and management capabilities, we are able to deliver a fully integrated technology stack for commercial lenders and banks. The API-driven data exchange enables a high level of real-time. Banks can now rapidly configure and launch new digital products such as asset-based-lending, invoice and receivables finance, with ease and control.

SME lending to boost the economy

By leveraging open banking APIs and data modelling to build a real-time view of the customer, banks can get a richness and quality of data that removes traditional blockers to extending credit to the mid-market and SME sectors.

I believe there is also a moral obligation for the industry to provide critical global supply chains with access to liquidity in order to fuel a global economic recovery. SMEs play a vital role in the global economy, so the industry must come together to remove the barriers that hold them back – including the inability to access external capital. Innovation happens where capital flows!

A low-code application development platform is a visual software development environment that empowers multiple developer personas. It uses visual development tools with drag-and-drop or point-and-click design capabilities, abstracting the code in application design and development, thus providing a simple and intuitive development environment. Low code helps to free up your IT staff to focus on more value-add tasks. It can help enterprises roll out applications with a shorter time to market with high abstraction— Utsav Turray, General Manager – Product Management and Marketing at Newgen Software

What is a low-code platform?

Low code enables enterprises to rapidly develop customized solutions and applications for multiple interfaces like web, mobile, wearable devices, etc., to automate end-to-end customer journeys.

Benefits of low code platform

1. Empower IT, Teams, for Optimum Resource Utilization:

Your IT teams spend long hours maintaining systems with periodic updates, compliance checks, and performance measurements. Low code can help you minimize this burden by automating such recurring tasks, allowing IT experts to focus on other important activities.

2. Fulfill Customer Expectations by Responding Quickly

Today’s tech-savvy customers want you to respond quickly to their needs. With these platforms, you can quickly respond to customers’ needs by developing and deploying applications rapidly. Also, you can deliver a personalized customer experience using customizable applications.

3. Enhance Governance and Reduce Shadow IT

Shadow IT is an area of concern for enterprises as it accrues technical debt and affects its overall risk monitoring. Low code offers a collaborative work environment and reduces dependencies on third-party applications. It helps reduce shadow IT through central governance and visibility.

4. Handle Complex Business Needs with Faster Go-to-market

A low code platform with well-designed functional capabilities like drag-and-drop tools helps developers handle a range of complex business and technological needs. These platforms enable faster development of complex business applications in a short period, fostering quick innovation and rapid go-to-market.

What is no code platform?

No code is a tool for nonprofessional developers. Using a no-code platform, anyone in the organization can build and launch applications without coding languages using a visual “what you see is what you get” (WYSIWYG) interface to build an application and intuitive user interface. A no-code platform often uses drag-and-drop functionality to enable development and make it accessible for organization-wide users. No code platforms are mostly directed to serve the needs of business developers who can develop applications with workflows involving fewer work steps, simpler forms, and basic integrations.

Benefits of no code platform

• With no code, organizations can work without IT interference.
• Organizations can make applications in less time and with fewer resources.
• Compared to conventional coding methods, no-code solutions reduce the development time since developers don’t need to hand-code each line of code.
• Functionality and design are more easily changeable than hard coding allows. Developers can also integrate any change easily and enhance functionalities in the applications whenever required; this helps businesses provide a better customer experience.
• No code platforms don’t require similar effort as a conventional coding approach to building applications, thus being cost-effective.

Difference between low code and no code

Working with Newgen, you’ll have access to Newgen’s low-code and no-code intelligent automation capabilities. However, both platforms focus on a visual approach to software development and drag-and-drop interfaces to create applications.

Low code is a Next-gen Rapid Application Development tool for multiple developers, whereas no code is a Self-service application for business users. The primary purpose of low code is the speed of development it offers, whereas, for no code, it’s the ease of use.

If the goal is to develop simple applications that require little to no customization and are based on improving the efficiency of a simple workflow, no code platform should be the ideal choice. An example could be order management, employee onboarding, or scheduling to improve employee efficiency.

Low code, on the other hand, is more suited to enterprise use cases. It is directed towards various personas, including business developers. Low code is more flexible than a no-code platform. An example could be Business Process Automation, Application modernization, Internal applications, and portals. Developers can work with stakeholders in all the stages of the development process, and low code can help them address complex integration scenarios, which gives an organization faster time to market.

The rise of Fintech is a challenge for regulators, as outlined by the IMF earlier this year. Yet legislation isn’t the only area which needs to keep pace with the evolution of finance. As digital services and infrastructure expand, cybersecurity has never been more important.

by Simon Eyre, CISO, Drawbridge

Cyberattacks are on the rise – increasing in both frequency and sophistication – and financial players are a prime target. For instance, research from the Anti-Phishing Working Group, shows the financial sector (including banks) was the most frequently victimised by phishing in Q2 2022, accounting for over a quarter of all phishing attacks. A successful attack of any kind can have catastrophic consequences: in February, cryptocurrency platform Wormhole lost $320 million from an attacker exploiting a signature verification vulnerability.

As finance evolves, it’s imperative that institutions of every size are doing all they can to protect themselves from cybercriminals. But what does that look like in practice? Let’s examine some key actions all companies must take.

Strengthening weak links

You may not be looking for weak links in your security infrastructure – but your adversaries definitely are. A single vulnerability is an open door for criminals.

Businesses must continually search for weak links in their cybersecurity armour – such as through vulnerability management and penetration testing – to identify and strengthen these weaknesses before malicious actors do.

This is especially important as working habits also evolve, with remote and hybrid working established as the norm. These offer many benefits but can also greatly increase risk as employees access systems from numerous locations and devices move on and off networks. In fact, Verizon’s Mobile Security Index report found that 79% of mobile security professionals agreed that recent changes to working practices had adversely affected their organisation’s cybersecurity. This isn’t to say that companies should ban remote working but they need to be aware of their heightened risk and be proactive about managing it.

Educating the team

A crucial part of this risk management involves employee education. Many cyberattacks rely on social engineering techniques like typo-squatting (often used in conjunction with targeted phishing attacks) to impersonate trusted parties and fool employees into providing critical access or even direct funds. Therefore, employees at every level need to know the techniques that are being used against them and be trained in the appropriate cybersecurity response.

The way this education is delivered is also important. A one-off PowerPoint presentation won’t cut it – teams need continuous training and engaging exercises, such as attack simulations, tabletop exercises and quizzes, to ensure that crucial information is taken in.

Creating a cast-iron incident response plan

Part of protecting yourself from the damage of a cyberattack is planning what to do in the event of one.

An incident response plan is a critical part of a firm’s cybersecurity infrastructure, structuring the steps to be taken following an incident. Plans should include key contacts and a division of responsibilities, escalation criteria, details of an incident lifecycle, checklists to help in an emergency and guidance on legal and regulatory requirements. Plans can even include template emails to support communications and companies should draw on knowledge from private resources and industry experts, as well as their government’s resources, to help them create a cast-iron plan.

The road ahead for finance and cybersecurity

Over the coming years, the rate of digital change isn’t set to slow. With BigTech’s eyes on banking, traditional banks innovating to keep up with challengers, the rise of ‘superapps’ and cryptocurrency supporting the emerging metaverse – to name just a few – there’s significant change still yet to occur.

The finance sector’s cybersecurity response must also continue to evolve in order to keep up. Part of this will mean relying more heavily on AI, such as in continuously monitoring networks for threats, although this tech will also be leveraged by cybercriminals. Additionally, it will be crucial for the cybersecurity as a whole to close its skills gap: there is currently an estimated global cybersecurity workforce gap of 3.4 million people.

The future is exciting but without the right protections, it can be dangerous too. If firms are to protect their assets and customers, they must build cybersecurity into the heart of their practices. Reaping the rewards of the FinTech boom means keeping firm control of your security risk.

Industry players are on a mission to differentiate themselves, while merchants and consumers are demanding innovative ways to pay for what they buy.  A seamless payment experience is becoming more and more important to consumers and therefore merchants as eCommerce continues to be as competitive as ever.

by Ed Whitehead, Managing Director EMEA for Signifyd

Guided by the industry leaders that participated in Signifyd’s FLOW Summit 2022, featuring nearly 300 eCommerce leaders discussing the current state and future vision, we delve into what the innovation in online payments has in store for all industry players.

Industry analysts are seeing the potential of payments for revenue optimisation and seizing on the opportunity. The innovation and excitement of online payments fit just right in the new eCommerce landscape. With customers demanding increased flexibility, user-friendly payment innovation is now an important influencer in eCommerce consumer behaviours.

According to research by S&P Global Market Intelligence, merchants are missing out on $16.3 billion in revenue annually due to false declines and $20.1 billion due to customers’ preferred payment methods not being accepted on retailers’ sites.

Merchants can benefit from a best-in-class fraud solution to help them optimise payments and capitalise on their revenue. The opportunity lies in the middle of the shopping journey. While customer acquisition costs are increasing, fulfillment costs will continue rising, with customers demanding faster and more personalised delivery. The opportunity for value improvement lies in improving user experience while optimising checkout and payments.

Ending the payments’ path to commoditisation

The heart of the shopping journey is essentially the shopping cart. This is a ‘make or break moment for merchants. Whether a customer continues to the final stage of their shopping journey or not will determine the merchant’s revenue.

Samsung Chief Digital Officer Kal Raman and his team adopted a “return on shopping cart” metric. Incorporating big data, it tracks what happens to orders after buyers hit the buy button and place items in carts. It aims to gather insight into how many of them convert, and what happens to those that don’t, and spot opportunities to save those customers for a lifetime.

For a bigger advantage in retaining customers, PSPs need to provide competitive packages of products that offer merchants value extending to their customers.

Nicole Jass, FIS senior vice president of growth solutions product, commented: “The biggest thing in payments is that payments are getting commoditized. The payments piece is like the utility company. We’re the electricity that you just accept comes to your house.”

What FIS, which includes payments provider Worldpay, is doing to break out of the mold is launching its Guaranteed Payments. In partnership with Signifyd which provides a very robust payment fraud solution, Guaranteed Payments will be integrated into the payment stack to provide merchants with higher and guaranteed approvals – a huge challenge and pain point for merchants.

As a first in the industry, this type of innovative collaboration will stop payments from being commoditized. It changes the eCommerce game rules from fighting fraud to approving good orders. That opens doors for customers to try new payment plans without the fear of fraud.

One of FIS’ customers already saw great results from this innovation in online payments. Its approval rate increased by 7%, which turned into $8 million. These are topline results. The hope is that this process will also affect other players, such as issuers, who will authorise more orders when they see they are receiving better quality orders.

With the realisation of how online payments can be optimised, PSPs, merchants, and customers are seizing the opportunity to maximise revenue and provide a seamless customer journey. Online payments are a gold mine for up-levelling the eCommerce game and stepping into the new era of eCommerce innovation.

The banking industry, among other industries, has witnessed a massive shift in customer behaviour with the growing use of digital channels, resulting in an increased volume of data banks manage. This data sits at the heart of the digital banking trend to provide superior, personalised, and highly secured service.

By Kalpesh Mistry, Senior Vice President – BFS, ITC Infotech

Cloud technology is becoming instrumental in reshaping digital banking services, making banking more seamless and convenient for customers. Over the last 5 years, banks have invested significant money in implementing omnichannel solutions powered by microservice-based architecture on a hybrid cloud environment with limited cloud adoption for their core banking and data solutions.

Many banks have embraced a lift and shift strategy to move some banking applications onto the cloud-virtualised platform to manage the regulatory expectation for their old data centre and reduce the Infra cost. But the establishment of full-scale cloud services like cloud-based data analytics and the transition of legacy core banking solutions to the cloud, is still in the early stage. On the other side, FinTechs have quickly identified the growing demand for digital banking and are the early adopters of establishing full digital banking on the cloud.

As most banks move towards Banking-as-a-Service on the cloud from their partially modernised banking solution implemented on an on-premise/hybrid cloud environment, it is essential to understand the possible challenges that could stand in the way of the bank modernisation journey.

Challenges Faced while Digitizing Banking on the Cloud

According to a study by Bain&Co, 80% of CEOs believe they deliver a superior customer experience, while only 8% of customers agree. This disagreement means that the banking impact on customers is heavily misunderstood.

• Customers’ expectations are rising quickly as transaction volumes, and associated revenues are shifting to challenger banks/FinTechs in the market. Banks must reinvent themselves with better digital banking tools to deliver a personalised experience. FinTech startups leverage AI/ML-based solutions to meet customers’ needs at a granular, tailored level. Their key focus is improving the delivery of financial services with a seamless user experience and simplifying the banking experience for customers.
• The security infrastructure and firewall are continuously upgraded to protect banks from cyber-attacks and various other security threats. However, we continue to see that security is compromised, which has resulted in penalties from regulators and impacted the customers’ trust in the banks. While a bank is moving its complete banking service and growing customer data to the cloud, it is important for the bank to redefine its IT security ecosystem and the resilience strategy along with the chosen cloud partners.
• Innovation and modernisation are imperative but require investment in people’s skill transformation. Lack of cloud technical expertise will affect cloud and product implementation. Creating a product or solution from scratch could drain time, money, and resources, along with siloed processes and slow decision cycles, which could delay time-to-market. Many banks lack the internal capabilities to innovate secured digital banking on the cloud.
• Cultural resistance – rigidity in the internal customers’ mindset must be transitioned to an agile one for a smoother transition to digital banking operations. The cultural resistance is linked to the bank’s investment in improving internal cloud competency.

Banks are adopting the strategy outlined below to accelerate digital banking on the cloud to maximise ROI

1. SaaS: a cloud-based Banking-as-a-Service solution

Build a tech stack of best-of-breed, Cloud-native technologies that allow the bank to swap components in and out as needed. A ‘”plug and play’ SaaS applications approach can help banks minimise time-to-value and time-to-market. SaaS Cloud solutions stand out from on-prem solutions due to their flexible pricing and subscription model, which delivers easy scalability while meeting the ongoing needs of an enterprise.

2. Open banking is considered at the heart of digital banking on the cloud strategy

According to a survey by Open Banking Org, 10–11% of digitally-enabled consumers are now estimated to be active users of at least one open banking service. This is expected to grow exponentially in the next 3 years. Open banking cloud architecture enables the data and services from various third-party sources, uses machine learning to generate granular insights, and then integrates data into banks’ channels in real time. Cloud has become one of the main allies in creating an open API secure open banking ecosystem to provide personalised digital banking solutions to improve the customer experience.

3. Collaborative engagement with a ‘Hyperscaler’ cloud provider

Proactive engagement with Hyperscaler cloud providers assesses the current technology ecosystem and defines the plan to develop the same. Hyperscalers provide various support, including technology assessment, future roadmap definition, POC, and training. Collaborative engagement with hyperscalers is crucial while the bank is in the early stage of development.

4. Internal team onboarding

Employees and internal audiences can individually benefit from Banking-as-a-Service on the cloud. The bank’s management must leverage effective communication media to onboard employees on the cloud journey through newsletters, web pages, and regular town hall meetings to ensure awareness of a cloud strategy is present across the bank thus ensuring a smooth, uniform transition with fewer bottlenecks.

5. Internal resource competency

Getting on the cloud is a journey, not a one-time exercise. While the IT team focuses on the technology roadmap and implementation, the HR and Training team must be empowered to define a roadmap for the upskilling of resources. The organisation also needs to leverage the training investment of the Hyperscalers and IT partners effectively. The bank must define the training goals jointly with its partners before beginning the cloud journey, and progress must be measured and governed by the executive steering committee.

Cloud technologies provide a best-in-the-class secured environment for a bank to fast-track its digital bank cloud strategy to deliver the increasing demands of digitisation. The cloud strategy has been utilised so far for its scalability and cost optimisation. But the way forward for a successful bank is to leverage hyperscaler nextgen investment in various cloud components such as data analytics and insight, Blockchain and more, to deliver higher value to its customers.

For many of us, the ease of accessing digital financial services, such as contactless payments and electronic transactions, is often taken for granted. However, across many parts of the world, millions of people do not have access to digital bank accounts or credit and debit cards and rely instead on cash for daily transactions and savings.

by José Cabral, Managing Director, Ria Money Transfer

In the age of globalisation and interconnectedness, more people than ever before are migrating to different countries in search of better opportunities. Many of the more than 280 million migrants around the world send money to loved ones back home. These cross-border transactions, called remittances, accounted for over $600 billion in income globally in 2021 and serve as a lifeline for many. Families receiving remittances invest them in education, healthcare, and food security.

The UK as a major remittance hotspot

Some countries around the world are hotspots for both immigration and remittances, as the two often go hand-in-hand. In the UK, over 14% of the country’s population in 2021 was foreign-born, totalling over 9.6 million people and a large portion of the job force. The majority hail either from other countries in Europe or from Asian countries such as India and Pakistan. With a significant migrant population comes a significant international cash flow; the UK is the source of billions of dollars in remittances sent annually, which make a sizeable impact on many recipient countries’ GDPs.

India is the country of origin for the largest portion of migrants in the UK, representing 9% of the country’s foreign-born population. It is also a leading recipient of remittances worldwide, and nearly 15% of UK remittances go to India. In 2020, India received over $3.9 billion in remittances from the UK alone, totalling almost 7% of all remittances sent to India in that year — only the US and the UAE had higher figures.

Nigeria receives the greatest total volume of remittances from the UK. An estimated $4.1 billion in remittances was sent from the UK to Nigeria in 2021, totalling 24% of all remittances sent to Nigeria that year. Other significant remittance flows from the UK include Pakistan, where almost 5% of the UK’s foreign-born population comes from and which received over $1.68 billion in remittances from the UK in 2020, and Poland, a country of origin to 7% of migrants in the UK and recipient of $1.14 billion in 2020.

The impact this has on economies

Remittance flows to the developing world have a powerful role in shaping local economies. Both Nigeria and India are global powerhouses with enormous economies, of which 4% and 3% respectively are derived from remittances. In Pakistan, remittances represent 8.7% of GDP, and over 6% of those remittances come from the UK. Cross-border money transfers to these regions are vital to the families who use this money to pay for food, medicine, and education, as well as to fund small businesses and make investments.

The ease with which migrants in sender countries like the UK can access remittance services has a direct impact on economic development in the regions that receive them. But those sending remittances to loved ones back home do face significant barriers, among them the cost of international money transfers. Globally, about 6% of the money sent by migrants is absorbed in transaction fees, with costs differing significantly between companies and destinations. The World Bank estimates that a 5% reduction in the cost of sending remittances would increase the amount available for migrants to send to their families by up to $16 billion per year.

Financial inclusion/social angle

One way to reduce costs and make transactions more accessible is to implement mobile solutions to send and receive money digitally. By making it easier for people to receive money wherever they are, remittances have an even greater potential to impact both national economies and individuals’ financial standing, creating greater financial inclusion. This can be especially true for previously unbanked individuals, who have their first connection to digital banking services through remittances. It can also help those who previously lived paycheque to paycheque or with irregular sources of income finally begin to put money aside.

The role remittances play in developing local economies through increased cash flows goes hand-in-hand with the social benefit they provide to the families and communities that receive them. The billions of dollars sent annually to developing countries can allow recipients to improve their standard of living through education, healthcare, food security, and savings. By giving people simplified access to finance by digital means, people across the world can achieve greater financial independence.

Unless you’ve had your head in the clouds for the past few years it would be difficult not to notice the pace of adoption of cloud technologies in financial services and the capital markets.

by Alex Walker, VP, Global Network Data Sales, IPC Systems

Perhaps one unforeseen consequence of the global pandemic was that the working world in general, and financial markets, in particular, would not simply resume ‘business as usual’ the moment physical restrictions on entering workplaces were lifted. Just a few years ago the idea of virtual trading floors would have been unthinkable, given the challenge and heavy burden of meeting rigorous security, performance, surveillance, conduct and reporting obligations. However, new cloud technologies not only facilitated efficient remote trading; post-pandemic there has been a seismic shift in mindsets as to what ‘institutional-grade’ operational and business models should look like.

The benefits of using the cloud

Market participants have options when it comes to selecting the cloud configuration that best satisfies their specific and extensive requirements, from security and performance rigour to ease of integration with internal infrastructures and external counterparts. Cloud technologies, in general, offer key benefits that include a pay-as-you-go subscription model, flexibility, scalability, significantly reduced times to market, removal of barriers to entry for new solution offerings, and the ability to respond more quickly to evolving market conditions.

As a pioneer and advocate of new data distribution and communications technologies, we endeavour to understand our clients’ pain points and their key drivers of change in embracing new cloud technologies, innovation, and emerging trends. Our survey this year of 500 professional trading practitioners uncovered that there was a relatively even split of respondents favouring integration with a public cloud over single and multi-party private clouds. We find that smaller firms and retail traders tend to focus more on cost-efficient market access and leveraging the economies of scale offered through shared (public) cloud infrastructures. However, the Tier 1 banks and large financial institutions will more likely lean towards private cloud infrastructures with enhanced, stringent, and rigorous performance and security layers. The solution for the majority of financial firms will be a hybrid of traditional and cloud connections and distribution models.

In terms of front-end trading applications in the cloud, it is still relatively early as far as ‘proof of concept’ and, not least because of the weight of regulatory and compliance obligations, the trading industry remains understandably circumspect about full adoption. That said, we are seeing a steady migration to certain aspects of cloud services, and over time expect order management services – and indeed core matching functionality – to transition increasingly to the cloud.

The foundation of digital innovation

Cloud adoption offers a starting point for firms to completely rethink how they access and manage costly, high-maintenance operational resources such as network and communications infrastructure, data storage, client connectivity, etc. This shifts business mindsets beyond pragmatic ‘build or buy’ decisions to a nimbler ‘as-a-service’ business model.

The ‘as-a-service’ consumption model mitigates the cost and risk of significant direct investment in cloud connectivity and service capabilities – as well as the arguably greater risk of being left behind as new cloud technologies and applications become the standard. Along with the anticipated increase in digital data points, financial institutions will be compelled to embrace the power of the cloud to continue to stay relevant in an increasingly challenging competitive environment, particularly with respect to new, non-bank, cloud-native industry disruptors.

The everyday integration of digital technology into our lives has had a significant impact on workplace cultures and structures. Cloud technologies allow firms to be much more flexible, mobile, and innovative. The success of this approach – in terms of measurable performance and driving more cloud-led business decisions to ongoing innovation – is linked irrevocably to the robustness of a company’s connection between its infrastructure and cloud environment.

While the global payments scene continues to be dynamic, broadly speaking, there are three regional approaches directing the progress of the market in their respective geographies.  In the European Union, the United Kingdom, and South Korea, the regulatory aspect – rules such as PSD2, GDPR and Open Banking regulations – remain highly influential in the changes taking place, especially the creation of financial ecosystems.

In Asia, it is market and consumer forces that are driving payment innovation. This article by Rajashekara V. Maiya, Vice President and Head, Business Consulting Group, Infosys Finacle, discusses the different forces that are driving global payment innovation.

Power is passing into the hands of consumers via their handheld devices, which are today more technologically capable than desktops and laptops. With every individual owning a mobile, maybe even two, in the markets of Asia, “cross-industry relativism” is in full flow – consumers, who can pay for their Amazon purchases in one Paytm click,  want similar levels of payments innovation from their banks.

In North America, where an overall weak payments market infrastructure exists side by side with pockets of excellence, it is the latter that is leading payments evolution. For example, Silicon Valley’s rich financial ecosystem is a driving force that every bank wants to be a part of. The North American approach is the opposite of the European one, with innovators, rather than regulators, in the payments driving seat.

Besides these three approaches, the following factors are shaping payments today:

Trends in the making

• Emerging regulatory or recommendatory payments standards – FDX in the U.S. and Canada, BIAN globally, PSD2 in Europe, CMA in the U.K. and CDR in Australia
• Trending domains, for example, Buy Now Pay Later in North America and Europe; P2P payments in Latin America, Europe, and North America; personal finance and payments aggregators; and cryptocurrency-based money transfer
• Disruptive business models, for example the recently announced Digital Banking Units in India, or other “people-less” branch models, providing a frictionless banking environment
• Banks behaving like Fintechs, and Fintechs behaving like banks to diversify payment and remittance ecosystems
• APIs which provided a strong enablement framework and then evolved an economy of their own
• New technology trends, including green tech, metaverse, big data, artificial intelligence and cloud, making the payments revolution more solid, yet seamless.

Retail payments innovation is crossing over to SMB and corporate segments

It is time to push the boundaries of payments, to give SMB and corporate banking customers the same benefits as retail consumers. For example, how can the QR code, where the rapid growth in subscription (1.5 billion in 2020 predicted to reach 2.2 billion in 2025) fuelled peer-to-peer or person-to-merchant payments,  be extended to drive ease of SMB and corporate payments?

A start for global standards

The shift from ISO 15022 to ISO 20022 is freeing cross-border payments from message type, to allow a broad swathe of remittance transactions. As payments become open, and API-driven, it is morphing from a peripheral service into a  “product” in its own right. What’s more, it is seen as a foundation for innovation, a potential “platform” offered as a cloud-based service with ecosystems built around it. No other banking product offers so much possibility.

A new class of start-ups, namely paytechs, is focusing only on payments innovation. Almost 90 countries are involved in pilot, or advanced POC, projects to build Central Bank Digital Currencies, which will fuel the payments journey by enabling faster, cheaper, safer, transparent and seamless transactions.

While payments are looking up globally, some regions are clearly ahead.

India leads the way

India is taking its success in digital payments forward with its Payments Vision 2025, which seeks to bring about industrialization, internationalization and inclusion in payments, and ensure UPI transactions continue to grow at a 50 percent CAGR over the current base of 6 billion monthly transactions.

Expectations run high with regard to innovations such as ONDC (Open Network for Digital Commerce) and OCEN (Open Credit Enablement Network), which are expected to drive payments to a new level. Both are game-changers, with the potential to disrupt the disruptors. ONDC will democratize digital commerce to bring about a multiplier effect in payments. OCEN will help to close the $1.2 trillion funding gap that cannot be bridged by the mainstream banking industry – think street vendors, micro-industries, and other tiny businesses with no access to formal credit who can now tap a microlending ecosystem. OCEN, which has already got the support of 7 banks, 40 account aggregators, and several Lending Service Providers, will change lending from low trust, high cost, high friction to high trust, low cost and low friction, to set benchmarks in global banking.

What next

APAC payments are expected to expand at 22.8 percent CAGR between now and 2026, must faster than North America’s 6.6 percent or Europe’s 12.9 percent¹. One reason is that North America in particular is battling process and technology challenges, an example being the traditional, low trust-high friction lending processes mentioned earlier.  A solution is to build “public good” infrastructures that can serve a variety of purposes, such as India’s UIDAI, whose Aadhaar number facilitates everything from bank account opening to SIM card purchases to direct benefit transfers.

This is especially critical because in theory, the American e-commerce market, estimated at $2 trillion in 2025, is best placed to propel the future growth of real-time payments. The problem is that it lacks the market infrastructure to do it. The U.S. should start building this infrastructure now, to be ready to tap exciting future opportunities in global payments.

Sources:

https://worldpaymentsreport.com/