IBSi Blogs

What do manufacturers of automobiles, personal computers, refrigerators, and tumble dryers have in common? They were all caught out by the global microchip shortage. The list of blindsided companies with a disrupted supply chain includes some of the most advanced, technological companies of our generation worth multiple billions. How could they not have the foresight to be prepared?

by Michael Boguslavsky, PhD – Head of AI, Tradeteq

2021 was supposed to be the year of recovery for global trade, but it hasn’t quite worked out that way for thousands of companies across the globe. A fire at a warehouse in Japan and severe winter weather in Texas both resulted in a temporary pause in the manufacturing of microchips. As it turns out, the timely delivery of these chips was essential to companies in more than 150 different industries.

Billions of dollars in profits have been wiped from balance sheets. Customers are frustrated by the delays and the ramifications are likely to be felt for another 12 months, at least. It couldn’t have come at a worse time with the global economy still reeling from Covid and will set back the recovery.

For example, tech giant Samsung announced that television and appliance production had been interrupted, while car manufacturers paused production because of a shortage of parts. Ford put the cost at a whopping $2.5 billion.

This demonstrates the extent to which the global supply chain, and therefore global trade, is interconnected. If companies on different sides of the globe know how reliant they are on each other, it begs the question: who could’ve predicted the havoc this would cause on the global supply chain, and how could they let it happen?

Hard questions and head-scratching in the c-suite

That wasn’t a rhetorical question. There is a lot of head-scratching going on in boardrooms all over the world. Chips are essential components of the everyday technology that consumers and businesses use – from household electrical devices to heavy-duty machinery. How on earth did this fly under the radar of dozens of multi-billion-dollar companies across different sectors?

The shortcomings are further highlighted by the fact that these companies have access to, or have developed, advanced and complex technology that would’ve been considered science fiction a few years ago.

Large global companies cannot blame a lack of resources. They have some of the best operational and risk management systems in place, which ultimately failed to recognise how a microchip shortage would affect their operations and help them prepare accordingly.

The reality is that many companies didn’t take steps to mitigate supply chain risks or respond quickly enough. This is a moment of self-reflection and humility for the global business community. It needs to learn the lessons from this debacle and put improved supply chain risk monitoring and communication protocols in place.

Integrating modern AI advances into the supply chain

Numerous systems today enable companies to track how their consumers engage with them in real-time. Companies can send payments to their partners thousands of miles away, in real-time, and communicate with people across the world as though they are in the same room. Surely the technology exists to monitor risks in their supply chains, more effectively?

An example of this is artificial intelligence technology which can monitor risks in the supply chain and take steps to identify and mitigate those risks before they become a systemic issue.

If, for example, a supplier has a cash flow problem, or weather patterns affect their ability to manufacture a product, or an incident takes place that affects companies of a similar size and profile, companies can receive an early-warning sign to investigate what happened, how it might affect them and respond quickly.

This ensures businesses are staying ahead of potential risks and systemic events, rather than reacting to them. It is an example of technology making the global trade and supply chain ecosystem more responsive, agile and efficient; it reduces operational risks and means companies avoid the ire of customers.

Future-proof your supply chain now

Global trade is interconnected, and companies are more reliant on one another than ever before, which is why the impact of the chip shortage has been and continues to be so significant. The last year has shown that many global events cannot be predicted or planned for, nor can their impact be completely avoided. Technology, however, and in particularly AI models, can be used to manage and mitigate the negative effects.

Technology has been one of the biggest drivers for change in global trade in recent years. It can be used to digitise and speed up how information is shared and improve communications across supply chains. The former CEO of General Electric, Jack Welch, once warned that companies should change before they have to – the past few months have given proof to that phrase.

When future incidents, similar to the global chip shortage, become case studies in business schools, colleges and universities, will your company be consigned to the history section or be acknowledged as a trailblazer that embraced technology? It’s a question that c-suite executives should address sooner rather than later, or it will be answered for them.

The pandemic escalated the creation of digital banking business ecosystems. In this article, Sanat Rao, CEO -Infosys Finacle, speaks about eight new and innovative digital business model archetypes that banks need to thrive in these ecosystems.

by Sanat Rao, Chief Executive Officer at Infosys Finacle

The conversation about digital business model innovation is not new, but it has never been more pressing. As CEOs grapple with their biggest challenge, namely, how to stay relevant amid rapid change and uncertainty, the legacy pipeline-based business model was often at the heart of the problem, and ecosystem-led business model, invariably, at the heart of the solution.

Digital technologies are unlocking opportunities to create, deliver, and realise value in new ways. By and large, the traditional universal bank is built on a pipeline model where the bank does everything, from manufacturing to selling to distributing, on its own, using in-house resources.  This vertically-integrated pipeline business model is breaking apart, giving way to fragmenting value chains and new business model opportunities.

Our latest research study on digital banking business model innovation, conducted in association with 11:FS, organized the new models into 8 distinct archetypes, which are briefly described below:

Digital-only banks: Digital-only banks deliver banking services entirely (or almost) through digital touchpoints. Their key competitive advantages are high-quality self-service experiences and much lower operating costs than traditional banks. While digital banks mostly target digital-native/ tech-savvy consumers and small businesses, some start with narrower segments and gradually expand their reach to other groups. Digital banks are mobile-first, with some online banking offerings; and even their customer service is digital-first, chatbots led with limited human support. There is a long list of such banks, among them, Marcus by Goldman Sachs, Liv. By Emirates NBD, Digibank, Monzo and Kakao Bank.

Digital financial advisors: The digital financial advisor model brings the private banking experience to a much larger customer base. With data proliferating rapidly and becoming highly accessible in the open banking economy, firms, such as Plum, Snoop and TMRW by UOB, are able to run it through AI algorithms to understand a customer’s financial situation and offer highly personalized, appropriate financial advice. The traditional relationship manager is replaced by a hybrid of self-service and personal assistance rendered by both humans and chatbots.

Finance marketplaces: Finance marketplaces enable customers to choose financial services from a variety of third-party suppliers in an open environment.  These marketplaces are accessed through websites and apps, and also developer portals and APIs. Examples include BankBazaar, Stripe, and Raisin. As the industry embraces open banking and open data paradigms, these marketplaces would increasingly democratize and facilitate easy access to the best products and services.

Non-finance marketplaces: Financial Institutions-led non-finance marketplaces – such as those from DBS Bank and Paytm – enable customers to choose a range of (non-financial) goods and services from suppliers in an open environment. For instance, DBS Marketplace is a one-stop portal to browse property listings, cars, book travel flights, book hotels, and compare utility providers, with financing options bundled along.

Banking as a service (BaaS): In this model, a bank offers complete banking processes around their financial products such as payments, loans or deposits as a service that third parties can embed into their products and services. BaaS enables integration of financial products seamlessly into the primary journeys of the customers such as getting instant auto loans at the dealer site. Typically delivered through well-defined APIs and business partnerships, BaaS is gaining significant traction across the globe. Banks of all sizes and persona such as BBVA, Goldman Sachs, Sutton Bank, ICICI Bank, and Solaris Bank are actively building their business using this approach. In addition, specialist BaaS intermediaries such as Galileo, Marqeta, and Setu, are also getting significant traction.

Banking industry utilities: Banking industry utilities specialize in delivering non-differentiating services by pooling resources, expertise, and capabilities to increase the efficiencies of all industry participants. The utilities offer a Business platform as a Service (BPaaS), combining technology, operations, and data. Examples include ClearBank – UK’s new clearing bank, Stater – The largest mortgage service provider of the Benelux that services 1.7 million mortgage and insurance loans for about 50 financial institutions in the Netherlands and Belgium

Banking curators: New-age digital banks following this model aim to offer best-of-breed products by combining basic accounts with financial advice and a curated set of third-party products on a single platform.  N26, Monzo and Starling Bank are all examples of banking curators.

Embedded finance: Companies with frequent engagement and deep customer understanding are embedding banking and payments into non-financial products and services. The interest for embedded finance is rising across industries. Digital technology giants, e-commerce companies, retailers, travel – companies from across the spectrum are actively embedding financial products in their user’s customer journeys. For instance, buy now pay later proposition at the time of checkout or offering cash-flow based credit products to suppliers in association with banks. Shopify offers a good example here. It offers a ‘Buy Now, Pay Later’ option for consumers, a business debit card for merchants, and plans to offer  business bank accounts with Stripe Treasury.

Like most businesses, banking is also going the way of the ecosystem. A scan of the landscape shows that few, if any, banks are succeeding by standing alone. But to thrive in an ecosystem, banks need to adopt new business models, such as those identified above.

It may seem like a paradox, but as the devices people use to bank get smaller and smaller, the amount of data involved in those services gets larger and larger. So, with all that data already increasing so dramatically, what’s going to power the future of FinTech as the number of transactions made each day reaches high into the billions? The answer is the mainframe!

by George DeCandio, CTO, Broadcom

I’ve spent decades working with leading organisations in the financial industry, and in that time I’ve seen a lot of impressive innovations that have reshaped the FinTech industry (and financial services in general). Take the advent of online banking in the 1990s, or the rise of blockchain and cryptocurrency in the 2000s, and the introduction of online payments like Apple Pay in the 2010s. It’s worthwhile to note that each of these innovations – and many others – would never have been possible without a host of significant technological advances taking root ‘behind the scenes;’ advances that enabled the tremendous amounts of financial data associated with those innovations to be handled efficiently, effectively and reliably.

As any financial industry CIO will tell you, big data calls for the Big Iron… the mainframe. You might be surprised to learn that over the past 5 years, as more and more transactions happened through apps and online, the amount of financial data processed on mainframes has actually gone up. That’s right. Up! While an account holder might use an iPhone to pay a bill, there’s almost a 100% chance that the transaction was powered behind the scenes by a mainframe.

It’s easy for people to see just the consumer-facing technology and apps as modern and cutting edge while regarding other systems in the same way they might their parents’ wardrobe – dated. I’ll admit I have a few shirts in my closet whose best days are now long behind them, but that’s not at all the case with the mainframe. These systems aren’t out of date. They’re very much cutting-edge technology, continually growing in capability and keeping pace with the world around them.

Mainframes are fast – really, really fast

Thanks to their speed, security, and flexibility, today’s mainframes can perform a blistering six billion transactions a day. If you want to know why no banks reported system failures during the pandemic despite all of the stress that has been put on the financial system, there’s your answer. And these systems will continue to be even more vital as the world moves into a digitally powered future.

Thankfully, most of the mainframes that are in use today – including the powerhouse IBM z15 – are actually new. I know … whenever a movie character mentions the mainframe, invariably there is a massive room-sized computer laden with pneumatic tubes and steam vents that looks like it belongs in a Jules Verne novel. But more than 90% of major banks in the US are using a mainframe that’s less than two years old. Instead of envisioning the deck of the Nautilus from Verne’s Twenty Thousand Leagues Under the Seas, it would be more accurate to picture today’s mainframes among the amazing equipment in Tony Stark’s lab from a Marvel Avengers movie.

Then we get to flexibility. Just about every app and tool that people use to send money (ranging from Apple Pay to Zelle to PayPal) depends on the mainframe. If you really think about it, none of us have bank accounts with Apple, meaning that when we use an iOS app to transfer or access funds there needs to be an integration with one or more banks. And all those touch points involve mainframes. Just because consumers don’t see it, doesn’t mean it’s not there.

The backbone of FinTech’s future

Not only is Big Iron (the affectionate term that mainframe aficionados use to describe these systems) driving FinTech tools that are in common use today, but it is ideally positioned for emerging technologies including digital currencies, digital wallets, payment gateways, peer-to-peer lending, and microfinancing. I recently rented a beach house for a weekend on Airbnb, and I know for a fact that there was a mainframe involved in the transaction. Even Bitcoin touches the mainframe, which is amazing to think about. Emerging FinTech models may seem like strange bedfellows with a bedrock technology like mainframe, but the reality is that if funds are involved, the mainframe is ideally positioned to be the reliable technology backbone to make it safe, fast, and secure.

Bridging these two worlds is a new generation of open-source approaches and standards, making it so that literally anyone who knows how to use a computer can use the mainframe. That’s why the Linux Foundation has a major initiative called the Open Mainframe Project that is specifically designed to drive mainframe innovation. This gives traditional financial institutions an opportunity to mine the talents of cutting-edge app and platform developers to roll out services that would have been unfathomable to think about even five years ago. It all comes back to APIs, which give forward-thinking technologists ways to access the mainframe without having to buy their own machines or build completely new infrastructures to take advantage of their power and flexibility.

When most people think about innovation in the financial sector, they think about disruptive products such as PayPal and Apple Wallet. But while those applications get all the glory, they are the 10% of the iceberg that everyone sees. If you look closer, what makes it all work is the venerable mainframe, which quietly keeps the entire FinTech world, and indeed the financial sector in general, afloat.

Most people associate the word ‘blockchain’ with cryptocurrency and given the amount of press coverage the latter has received, particularly in the last two years, it may seem that the two are indistinguishable, but that is not the case.

by Mario Galatovic, Vice President Products & Alliances, Utimaco 

Blockchain is ultimately a means of storing information, no different in some respects from an Excel file, SQL database, or even a hard drive. The major difference is that this technology is distributed over a network of peers called ‘nodes’. Each entry in a blockchain contains a cryptographic hash linking it to previous blocks in a chain, meaning that once data is recorded it cannot be altered without altering all subsequent blocks.

Given their high level of security, blockchains have been mooted as a solution for a range of problems, and despite the ‘wild west’ reputation that it has due to some spectacular security breaches in cryptocurrency trading, major companies like IBM are using it in applications ranging from trade finance to vaccine distribution.

One key application that would solve a huge number of problems is that of identity: identity theft is a growing problem, and proving identity is a difficult task that places a huge administrative burden on companies and individuals. Before getting a loan, buying a house or starting a business an individual has to prove their identity, and this can be an onerous task, particularly if you are one of the 1.7 billion people in the world without a bank account, one of the world’s 82.4 million refugees or an undocumented migrant.

So how might blockchain technology help create digital identities, and how might they be secured?

Opportunities and challenges for digital identities on the blockchain

The idea of creating a secure digital identity isn’t new, but the need for it is becoming more pressing by the year, as more problems with our current system of disconnected digital and analogue documents certified by multiple authorities become apparent. A so-called ‘Good Digital Identity’ was one of the pillars of the 2018 World Economic Forum meeting in Davos, aimed at creating ‘a new chapter in the social contract’. Worldwide the market for identity services is expected to reach $14.82 billion this year, and the administrative and social costs of the difficulty of proving identity is impossible to estimate but likely to be much higher.

Real-world applications of this technology already exist: the UMHCR already uses blockchain technology to distribute food to refugees based on biometric data, and it is possible that the technology could be used to prevent the estimated $40 billion in corruption caused by aid not reaching the people it is intended for. Both applications depend on identity: being able to link a person’s iris scan to a ledger of when they last received food aid and being able to ensure that payments reach a particular person or agency and no others.

There are also uses for this technology that could become more widespread: international travel could be sped up considerably by having digital instead of analogue passports, as anyone who has lost a passport before travelling could tell you. Background checks when applying for sensitive job roles could also be done instantly as opposed to through contacting multiple agencies. Transferring healthcare information internationally, which often involves fax machines, would also speed up considerably.

Returning to the subject of cryptocurrency, despite the security inherent to storing financial information on the blockchain, many cryptocurrency users have either had their wallets compromised or simply lost the passwords for them because there is no way to connect that wallet to their physical identity. If you forget the PIN for your bank card it can be reset because there is always a ‘you’ to connect that account to, but if a cryptocurrency wallet that can be accessed with only a username and password is lost then it could be gone for good. A robust digital identity system could solve this problem.

How blockchain can secure identity

Blockchain technology is a sensible way to achieve a ‘good’ digital identity. Although there have been concerns about speed when applied in the cryptocurrency space, where making a payment or transfer can take considerable time as the blockchain works through a backlog, blockchain technology is potentially very fast, and being ‘centralised’ (in the sense of all being in one blockchain) means that auditing information will be much faster and tamper-proof. Being decentralised, an identity blockchain could be accessed from anywhere but would be extremely secure: for example, if you were applying for a loan online you could grant the lender access to the details they need and nothing more, just as when you sign up to a service with Facebook it will tell you that it will have access to your friends and so on.

When applying for a new job you could allow access to your work history but not your medical record, when having a check-up with a doctor you could grant access to medical records but not your work history. Because each granting of access would be a ‘transaction’ on the blockchain you would have oversight on who has access to which elements of your digital identity, and this system could even use smart contracts to allow time-limited or conditional access to certain records.

There is also the matter of security. Blockchain technology is innately more secure than other information storage technologies because of the very fact of it being a ‘chain’ – you cannot go back and alter a piece of information, deleting the record of a payment so that it ‘never happened’ for example. Although it would be very difficult, this would be hypothetically possible in current forms of data storage – your bank balance is effectively a number in a spreadsheet. Blockchain technology wouldn’t allow for this, making it ideal for highly sensitive applications like identity.

Of course, blockchains can and have been compromised, so they will need to be secured with similar technology to that which secures more traditional information storage. Public and private keys backed by strong, quantum-safe cryptography generated by hardware security modules will enhance the safety of blockchains and allow for the creation of secure digital identities.

Historically, accounting software has been designed to help finance teams manage time-costly tasks, improve accuracy, and counter the repetition of month-end tasks needed to close the books. The pitfalls of this approach and the focus on the ‘task’ has resulted in models that have made it more difficult for accounting professionals to rise above the numbers. In other words, software tools have traditionally placed an outsized focus on the minute details of closing tasks which have stymied accounting professionals, ensuring better accuracy, and visibility at the expense of a more analytical interpretation of the financial data.

by Mike Whitmire, Co-Founder and CEO, FloQast 

Conditions are optimal for software that provides a more elevated approach. A new trend emerging within the sector is that accounting is increasingly intertwined with and responsible for the business operations function. This occurs by virtue of the fact that accounting underpins the ability to operationally run a smooth department and, more importantly, the entire company.

Unquestionably, this trend has been accelerated by the pandemic, where teams have become remote and increasingly siloed from one another. In functions such as accounting, there is an important need for collaboration and transparency when it comes to completing functions around the month end. Controllers were faced with a greater challenge than ever before, how to maintain collaboration and communication remotely?

It’s no surprise, therefore, that the pandemic has also increased the need for cloud-based solutions to engender better communication across distributed teams. Tech of this kind has taken centre stage, proving its utility in enabling simple processes, such as end of the month, to be completed more efficiently, giving way for accountants to increase their focus on much needed strategy and agile thinking during such unprecedented times.

The use of artificial intelligence and machine learning technology has helped automate the ‘low hanging fruit’ functions with modern accounting software allowing finance professionals to apply their human intelligence to solving higher level problems. In essence, when the small stuff is automated, individuals can better see the forest, without having their field of vision obscured by the individual trees. However, in order to achieve this level of focus, it is important that the software used is intelligently designed to enable it.  At its heart, software needs to be informed by the people doing the job, in this case, the accounting team. This way it can address and solve the very real day-to-day challenges and become indispensable, whilst freeing up time of the controller to enable strategic thinking.

Taking the time to consider practical use cases and listening to customer challenges is also equally important for software design. Companies will often start using accounting software as a way to optimise accounting functions alone but may move beyond that, wanting more from their software. For example, by offering a way to collaborate and provide transparency around any process under the function of the controller.

Understanding and delivering on customers’ needs should be a fundamental driving force behind any accounting software and will lead to greater credibility for the product. Likewise, an ability to free senior finance professionals from the burden of repetitive, number-crunching tasks will enable them to open their eyes, offering strategic input to fuel improved decision making, and ultimately lead to stronger business performance.

IBS Intelligence is partnering with Sopra Banking Software to promote the Sopra Banking Summit, which takes place 18-22 October 2021. The summit is tackling the biggest issues in the financial sector. This weeklong festival of FinTech will touch on the hottest topics in financial services and highlight the new paths industry leaders are taking.

The following article was originally published here.

Regulatory reporting is a key part of the framework contributing to stability within the banking system. This is fundamental, as the sector’s business activity generates significant risk, which can affect the economy and its stakeholders, such as consumers, companies and governments. That’s why banking activity is regulated. Banks are required to report standardised information to supervisory bodies, known as regulatory reporting.

by Aurélie Béreau Adélise, Product Marketing Manager for SBP, Sopra Banking Software

While the delivery of reports may be transactional, periodic and calendar-based, the requirements can emanate from separate legislative and banking bodies, even though all these stakeholders have the same objectives:

• Ensuring monetary and financial stability
• Promoting international cooperation and transparency
• Protecting customers

However, the notion of regulatory reporting is very broad and covers a variety of obligations, the requirements of which are constantly expanding. This complicates the burden on financial institutions and increases the cost of maintaining their compliance.

Today’s stakeholders believe that the current regulatory reporting system, following several attempts at harmonisation within the framework of European integration, is no longer fit for purpose. This has led European companies to agree on the implementation of a new reporting system: integrated reporting.

New proposals following attempts at harmonisation

The European Central Bank (ECB), responsible for compiling reports for statistical purposes, has been trying to harmonise its reporting requirements for some years. Corep and Finrep were the first reports to be standardised within the various EU countries, starting in 2007. Next came AnaCredit in 2019, along with the advent of granularity and the emergence of new technologies enabling the analysis and exploitation of large data sets. And finally, BIRD (Banks’ Integrated Reporting Dictionary) – a collaborative project that’s still ongoing between the ECB, National Central Banks (NCBs) and commercial banks, which aims to define a shared set of transformations for regulatory reporting purposes.

Today, the ECB would like to move toward more granularity and has launched an overhaul of its requirements via its Integrated REporting Framework (IREF) project, which should be completed by the end of 2024. It launched a ‘cost-benefit’ investigation, completed on April 16, to assess the relevance of the main scenario it would like to implement. This survey was sent to the entire industry, including national banks, commercial banks, banking associations and software providers.

Similarly, the European Banking Authority (EBA), in charge of collecting financial and risk data as part of the banking industry’s single supervisory mechanism, launched a public inquiry from March 11 to June 11. The inquiry aimed to assess the implementation of the IREF counterpart on the prudential and resolution part of the project, called the Integrated REporting System (IRES). This project has made less progress than the ECB project, so there is a question as to how the ECB and EBA projects will eventually converge.

While the EBA has not yet disclosed the next steps for the implementation of harmonised reporting, the ECB foresees the transition to integrated IREF reporting between 2024 and 2027 in the area of statistics – monetary, AnaCredit and securities holding, in particular.

Is integrated reporting the final step in regulatory reporting?

In recent years, the number of new reports has grown exponentially. And each new addition requires work, expense and time. The idea of an integrated reporting system that brings all the information together in one place is therefore attractive, but only if it does not follow the same dynamic as the previous ones. These questions must be answered in the coming years to ensure an effective and rapid transition.

As with every other sector and industry post Covid-19, the Indian banking system has also become increasingly hybrid. However, the banking system is one of the first sectors to have experienced consistent digitisation, even before the onslaught of social distancing and mandatory lockdowns. The banking and financial services industry in India has undergone a transformative phase over the last ten years, with lending and banking models witnessing sea changes and coming into their own in the information age.

by Kamal Sharma, Head – Business Development (Regulatory Practice), Profinch 

The Technology Disruption

The Indian banking landscape has seen major changes, especially over the last two to three years. In fact, 2019 was the first year wherein Indian fintech companies surpassed global counterparts when it came to raising funds, attesting to the strength of the Indian banking demographic. United Payments Interface has, since then, become omnipresent, with even the smallest tea shops and snacks centres flaunting the ubiquitous QR code which allows Indians to make transactions and payments without carrying cumbersome wallets or debit cards.

Digital payments have risen steadily, and the banking system has transformed itself into a digitally mighty entity further supported by the rising presence of neobanks offering online-only services to new-age customers. While the industry was developing steadily, the pandemic turned into the ultimate catalyst for the hybrid movement, prompting people to forego physical visits and turn to their phones and laptops to access bank accounts and complete transactions.

With the Reserve Bank of India (RBI) increasingly widening the horizon of data capture from Indian banks, this blog focussed on RBI’s mandates for one of India’s growing Banking sectors – Urban Co-operative Banks.

Automation for UCBs

RBI recently implemented Centralized Information Management System (CIMS) to replace their existing Data Warehouse system. The objective of CIMS is to collect and process all returns from regulated entities and various Central Office Departments of RBI. RBI intends regulated entities to build a system to help their data flow automatically from their IT system to CIMS without any scope of manual intervention. After its thorough research on the automation/integration of a sample of banks, RBI announced CIMS in 2020. As of now, CIMS has reached its advanced stage. RBI has also released a web portal called Staging Area Data Portal (SADP) which is for the distribution of system-to-system software components of CIMS. Technically speaking, CIMS architecture is made of four layers; namely, Data Collection, Data Governance, Big Data repository and Centralized Integrated Analytics. The functionality would work by collecting data from multiple channels and by including a system-to-system automatic interface, file upload, API, web-screen and a few other components.  Top 14 Indian UCBs have been selected by DoS to implement data collection for the system-to-system channel for CIMS. These UCBs will be responsible for building a central data repository and all their returns will also be generated in XML/XBRL format as specified by the RBI.

With widespread digital transformation of banks, there is a need for stringent norms and regulatory oversight. Indian lenders, including Urban Cooperative Banks or UCBs, must initiate detailed regulatory reporting to ensure compliance with all statutes and this leads to the generation of a tremendous volume of data. Combing through the generated data and culling out insights becomes a tough task for the UCBs and their employees and this is one more avenue where technology offers a helping hand, furthering the digitisation drive. Software aimed at creating automated data flows and centralised information and management systems are coming to the aid of UCBs that are burdened by regulatory requirements. It is also wise for banks to use their Automated Data Flow/CIMS system to help their business reporting and other MIS requirements. It helps then convert its RBI investments into a business centre and not just turn into a cost centre. Banks can also utilize the additional value, like customer insights/spending patterns/demographic/gender/age base customer analysis, that will come from this architectural change.

The RBI is keen on digitising the banking sector and, accordingly, the central bank in August 2021 directed UCBs with assets worth 2000 crore rupees and above to implement system-based asset classification from June 30 onwards this year. Following the mandate, asset classification, including both upgrading and downgrading would be carried out by computerised systems, in a fully automated manner, mitigating possibilities of human error. The move is aimed at enhancing efficiency, transparency, and integrity of the process and is a definitive stride towards digitisation and technology adoption.

Requirements for Smooth Implementation

While regulations and mandates provide a roadmap, it is up to the UCBs and service providers to ensure that the mandate on automation is carried out successfully. The RBI has advised concerned UCBs to conduct pilot/parallel runs and evaluate the results for accuracy/integrity of the asset classification to ensure that implementation of the system proceeds smoothly. Further, the central bank has also stated that UCBs not meeting the criteria can also voluntarily implement the framework in their own interest. It is in this scenario that technology solutions and service providers come to the fore to enable UCBs in meeting regulatory demands and requirements.

For instance, fintech companies are now offering banks pre-built frameworks for automated data flows, ensuring faster download of latest templates configured using business rules and in-built calculations. Such systems facilitate data integration across sources and aid collaboration among valid users. Further, innovative solutions empower UCBs to respond to regulatory questions on calculation methodology and reporting values by offering drill downs, configurable business logic definition screens and the capability to upload supporting documents and re-generate old reports with previously submitted data. Audit trails for easy traceability is another service offered by such solutions.

With the amalgamation of automation and stringent regulatory mandates, UCBs, and the Indian banking ecosystem at large, are on their way to a more efficient, accurate, and transparent future – while offering customers the best of digitisation, convenience, and security.

VRP APIs are being implemented by the UK’s 9 largest banks to enable customers to freely sweep money between their accounts following a ruling by the Competition and Markets Authority (CMA) in July. In practice, that could help people avoid overdraft fees or increase their automated savings.

by Kat Cloud, UK Policy Lead, Plaid

This is a major step forward and a win for both consumers and businesses as the CMA continues to create more competition across the banking sector. Through this change, consumers and business owners can feel more confident in their money management without fearing unnecessary, not to mention avoidable, charges.

What are VRPs?

Like a direct debit, where a business is able to collect recurring payments from the same customer without permission for every payment, VRPs offer businesses and consumers a similar process through open banking. Banks integrating the VRP API will enable third party providers (TPPs) to initiate variable payments at variable times, without getting the permission from the consumer every single time. As with the overarching mission for open banking, VRPs are intended to create a seamless and frictionless experience for customers.

One of the most common use cases of VRP APIs is sweeping, also known as me-to-me payments, which use TPPs accessibility across different accounts to understand where people can seamlessly transfer money from one account to another. From a consumer perspective, there are many practical applications for this, such as transferring money into an account to prevent dipping into an overdraft therefore avoiding fees, or topping up a savings account by transferring the leftover cash from a coffee purchase.

How can VRP APIs help to eradicate financial vulnerability?

The VRP mandate is the latest move in protecting customers while helping them to lead healthier financial lives. Indeed, as open banking continues to foster an environment where consumers and businesses have access to a wide range of financial products and services, the VRP API is the next step in creating a seamless financial ecosystem that reduces stress, confusion and saves time.

For those in a vulnerable financial situation, the VRP mandate will help them to monitor and manage their accounts. For example, if a consumer has insufficient funds in one account, VRP APIs can transfer money over from another account to prevent them entering an overdraft. Given its smart nature, the API has the capability to move money seamlessly, without constant permissions. In turn this helps prevent consumers from being charged high overdraft fees and penalties, all while creating a pathway to a more secure financial situation.

What’s next?

Once again, the UK is leading the pack against its EU counterparts in creating a fairer financial system through the power of technology, while at the same time maintaining the central ethos of open banking – putting the consumer back at the heart of the financial ecosystem.

Looking ahead, VRPs will certainly have broader use cases in the future. As the process is like direct debit payments, we can expect to see variable payments for utilities bills, investment accounts, subscriptions and more. As we continue to transition towards open finance, the VRP ruling is an important step in promoting financial democracy while helping to eradicate financial vulnerability.

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.

IBS Intelligence is partnering with Sopra Banking Software to promote the Sopra Banking Summit, which takes place 18-22 October 2021. The summit is tackling the biggest issues in the financial sector, including public cloud. This weeklong festival of FinTech will touch on the hottest topics in financial services and highlight the new paths industry leaders are taking.

The following article was originally published here.

Cloud computing has long been an attractive option for banks looking to optimise costs, improve flexibility and facilitate digital expansion. Historically, cloud adoption has meant private or limited deployments due to concerns ranging from security to compliance. But in a post-Covid world, the drumbeat of digitisation has gotten louder, and more banking leaders are moving past their reservations. And recently, the use of public cloud platforms is gaining traction. This is due to ongoing margin compression, the need to reduce costs, and the imperative for banks to innovate faster—all things the public cloud can help solve.

by Martin Lee, Head of Managed Services & Cloud, Sopra Banking Software

As more financial institutions move to leverage cloud providers’ huge investment in their tech stacks, it’s worth pausing to survey the landscape and understand the most important considerations for banks moving forward.

The state of cloud banking 

The phrase ‘cloud computing’ spans a range of classifications, types and architecture models. In simple terms, a private cloud means a dedicated cloud computing network. In contrast, a public cloud is cloud computing delivered via the internet and sharing underlying infrastructure across organisations. A hybrid cloud is an environment that utilises both physical and cloud hosting.

In the last decade, the use of public cloud computing via services like Microsoft Azure or Amazon Web Services has turned into a $240 billion industry. In banking, the public cloud is already commonplace for non-critical tools, and a typical bank’s computing environment already includes on-premise systems, off-premise systems and multiple clouds.

Indeed, 19 of the top 20 US banks have already announced public cloud initiatives. In late 2020, IBM rolled out a financial services-specific public cloud featuring 10 of the world’s largest banks as customers. While there is a lot of activity, maturity levels vary. For instance, according to a recent report, 80% of UK banks have migrated less than 10% of their business to the public cloud as of 2020.

But that’s rapidly changing.  Banks know they can no longer ignore the benefits if they want to stave off competition and remain profitable. Data from McKinsey underscores this point. According to one of its surveys, more than 60% of banks plan to move the bulk of their operations to the public cloud in the next 5 years.

Benefits of running a bank in the public cloud  

The trend of public cloud adoption is, to some degree, traditional banks following the model that FinTech proved, i.e., using the cloud to be flexible, agile, and responsive. Through our experience, we have seen several specific use cases where banks in the UK have benefited from the use of cloud-based services. These include:

• Avoiding high CAPEX costs for new and replacement hardware with a more efficient OPEX model, removing the need for future one-off hardware investment
• The ability to access and leverage a wide range of digital products, offerings, and integrations, which are only possible with cloud-based technologies
• Reducing the risk and impact of Covid-19 and other potential business continuity issues by avoiding the need for staff to physically access specific locations to deliver services
• Increasing and ensuring operational resilience in a cost-effective manner to meet the latest regulations
• Improving efficiency via automation and infrastructure-as-code reduces manual effort and improves response times—plus, it reduces complexity and technical debt related to legacy systems

Considerations and keys to success

While there is a general trend toward public cloud adoption across banks in the UK and elsewhere, there are a few important areas to consider to ensure the greatest odds of success.

Be clear on the specific benefits that cloud is bringing to your organisation 

The public cloud brings many potential benefits, but not all of these will apply to every circumstance. And a move to the cloud is generally most effective as part of an overarching business strategy, rather than a strategy unto itself. It’s therefore critical to define which business benefits a cloud migration is expected to deliver.

Don’t assume that the cloud will be secure by default  

Most cloud-related data breaches are due to misconfiguration, not a flaw in the infrastructure itself. This means that it’s essential to either develop the expertise in-house or work with a managed-services provider to ensure that issues around configuration and methodology are avoided.

Understand where your data is 

A well-established benefit of the public cloud is that it enables users to ‘go global in minutes.’ However, for European banks, there are often specific requirements around data residency and transit.

A proven and audited system design, combined with the right technical controls, is key to making sure that data is administered correctly and housed only in approved locations.

Maintain the right level of capacity 

While virtually unlimited amounts of capacity are available in the cloud, utilising it means there is a chance of paying for unnecessary resources. To make sure cloud environments are being used efficiently, it’s important to collect, monitor, and react to the data and metrics available.

Leverage cloud technologies to increase automation and agility 

A significant advantage to hosting applications in the public cloud is to leverage its elasticity, integration and orchestration facilities. Yet, to make use of these, a suitable level of staff expertise, modern working practices and system design is required. A simple “lift and shift” of current hardware will be unlikely to bring improvements with no other changes made.

Improve operational resilience 

The major cloud providers—Amazon, Microsoft and Google—operate at scales that few can match. By adopting best practices like AWS’s Well-Architected Framework, it is possible to increase operational resilience via many layers of redundancy, recovery automation, and the use of multiple regions and availability zones. However, these areas can be maximised only if the right skills, experience and approaches are used.

Select the right partner 

While the public cloud presents exciting opportunities, little can be done without the right partner. Unless significant investment is made in recruiting staff with extensive experience in cloud migrations, transformations and optimisation, capturing the full potential is challenging. When selecting a public cloud partner, there are several vital aspects to consider. These include certification and standards, technologies, data security and governance, reliability, migration support, and service dependencies.

Moving forward 

Adopting cloud technology isn’t a catch-all solution for banks. However, increasingly, doing so has clear benefits when compared to traditional IT deployments. By choosing the right partner, banks can enjoy all the benefits of the public cloud while ensuring security, compliance and support are maintained. In today’s world, progressive banks are meeting customers where they are—and that’s increasingly using services hosted in the public cloud.