IBSi Blogs

By Garreth Dorree, Head Of Operations, Paysafe Group

As the battle to contain the global outbreak of COVID-19 continues, millions of people around the world stay at home to assist society’s effort to ‘flatten the curve’. One consequence of this is that consumers are increasingly choosing to shop online.

But even in times of global crisis, cybercriminals are on the lookout for ways to exploit unsuspecting targets. In fact, Action Fraud reported a 400% increase in COVID-19 related fraud in the UK between 1 February 2020 and 18 March 2020.

Most of these incidents include online shopping scams where people order protective masks, hand sanitizers, and other products that never arrive. However, scammers are increasingly preying on people’s fear and anxiety; the past few months have also seen an increase in phishing attacks, fake websites, and incidents of shipping fraud.

It’s too soon to tell how the pandemic will impact the world of business payment operations, but experts agree that the threat of increased fraudulent activity to businesses is likely to increase also.

 An ounce of prevention is worth a pound of cure

 Small businesses have already been severely impacted by COVID-19, so the effect of further damage such as fraudsters making payments using stolen or fake credit cards is even more catastrophic. For those that are able to offer online shopping services, it’s never been more important to secure your checkout and protect your business and your customers from falling victim to cybercrime and online fraudsters.

Sticking to the healthcare theme, it’s clear that prevention is better than cure when it comes to cybersecurity. However, 70% of online small-to-medium-sized businesses currently struggle to find a balance between improving security measures and their other primary objective at the checkout; making the online customer journey as quick and easy as possible.

This is according to recent research by Paysafe. The research also found that security is the top priority when selecting a payment service provider. 81% of online merchants believe that it’s the responsibility of their payment service provider to protect them from fraud, and a further 59% cited security as a critical factor to consider when deciding which service providers to partner with, ahead of reliability (49%) and cost (47%).

Fraud also remains a serious issue for all businesses. Over a third (36%) saw credit cards as the most vulnerable method of payment.

 The benefits of migrating to 3DS2

One of the best ways to keep your business and customers safe is to migrate to 3DS2 immediately. 3DS2 is the long-awaited upgrade of 3D Secure Authentication, the EMV verification protocol for processing card payments online securely. The new and improved 3DS2 builds on this and now enables mobile support and biometric validation. Most importantly it streamlines and secures the checkout experience for the customer, resulting in less cart abandonment, a better conversion rate, and much more robust security for e-commerce businesses.

Avoiding a dramatic increase in card declines is a key reason for merchants to integrate a 3DS2 solution into their checkouts, but there are also additional benefits to merchants and consumers that should persuade businesses to implement 3DS2 as soon as possible.

For example, unlike the current 3DS authentication, 3DS2 is optimized across all eCommerce devices including mobile. This is critical as, according to our research, more Millennials (79%) and Gen Z (72%) consumers shop regularly via their smartphone than any other device including a laptop or desktop computer.

3DS2 also improves customer experience by giving consumers more choice over how they authenticate payments. In addition, passive sharing of more than 100 data points (10x the current volume) for each transaction enables issuers to perform a better risk analysis, which results in significant improvements in fraud prevention without compromising a consumer’s checkout experience.

In this time of crisis, two of the greatest hurdles to overcome for eCommerce businesses are satisfying consumer demand for greater flexibility in the way they pay, and offering a slicker, more seamless checkout experience while giving the customer peace of mind that the payment is secure.

As a result, merchants need a payment service provider that can be adaptable and mindful of the bigger picture of solutions as the market evolves. While the pandemic will pass, it offers lessons for dealing with other global events in the future. Now is the time to take steps to safeguard your business against fraud and future proof your checkout in order to remain competitive with industry leaders and retail giants. Integrating PSD2 into your checkout as soon as possible means your business and your customers have the best chance of being protected from being a victim of fraud during these uncertain times.

(Disclaimer: The views and opinion presented in this article is that of the authors and not necessarily expresses the views of IBS Intelligence)

Digital transformation is having an undeniable impact on reshaping the finance sector as a modern industry. Banks are looking to emerging technologies in order to evolve and become more agile, especially in a world of demanding customers, new innovations, such as mobile payments, and increasing regulatory demands. Cloud adoption of RegTech is at the very heart of this digital evolution.

by Matthew Glickman, VP of Customer and Product Strategy at Snowflake Inc. 

While the industry has traditionally been slow to embrace innovation there are signs that even some of the more traditional, high street banks are placing cloud technology at the forefront of their business strategy. Research from the Bank of England revealed the UK’s 30 largest banks have adopted nearly 2,000 cloud-based applications between them.

However, there still remains an air of caution within the finance sector when it comes to moving to the cloud, stemming from concerns over financial regulation. Nearly half of UK firms cite complex regulatory requirements as a key barrier to adopting new technologies, such as the cloud. To maximise the full potential of embracing cloud technology, financial companies must look to the possibilities afforded to them by RegTech.

Streamlining the regulatory process

Whilst cloud computing is modernising the whole financial services sector and paving the way for innovation, its impact on regulatory technology will be particularly striking. The cloud will streamline the way financial regulators currently regulate other companies. Historically, banks have struggled to produce the metrics requested by regulators which has slowed down the regulatory process and even induced hefty fines.

Regulators will now have a unique opportunity, through a cloud-based, secure data exchange, to access a company’s data and run their own reporting. By utilising a cloud data exchange, financial regulators can integrate disparate systems to communicate in real-time. This creates a seamless flow of information by transforming data from multiple systems into the same ‘language’. Using RegTech, rgulators can therefore instantly view and analyse all relevant metrics, such as financial transactions, sales orders and stock levels. It also allows regulators to measure system risk entirely in real time.

Automating financial compliance

The ever-changing landscape of regulatory compliance is also driving financial organisations to utilise cloud-based regulatory technology and leave behind antiquated legacy solutions. New regulations are being consistently introduced and the JWG, a financial think tank, estimates that over 300 million pages of regulatory documents will be published by 2020. In addition, new directives and laws have been introduced, such as GDPR, which are holding companies to account and ensuring they take strict responsibility for their data.

By adopting RegTech solutions, financial companies can monitor the current state of compliance against upcoming regulations, as well as real-time compliance. A cloud-based RegTech solution will enable banks and regulators to build platforms that will make use of artificial intelligence and machine learning. This creates an end-to-end automated solution that provides an automated interpretation of financial compliance. Data can also be routinely monitored allowing companies to rapidly identify risks and potential areas of non-compliance.

The complex and changing landscape of data compliance, coupled with the rapid increase in data volumes, has meant that adopting a cloud-based RegTech solution is simply too hard to overlook. It is therefore no surprise that the RegTech industry has been growing exponentially over the last few years and is due to be worth $12.3 billion by 2023, up from its market value of $4.3 billion in 2019.

Coping in a data-driven era

The modernisation of the RegTech industry, through cloud computing, is characteristic of the whole fintech sector. The scalability that the cloud offers will also enable the industry to keep up with the dramatic rise in data. In a data-driven era, the financial services sector is arguably the most data-intensive sector in the global economy. Financial organisations produce huge amounts of data everyday with each monetary transaction and payment adding to their vast data sets.

A cloud-based data warehouse can be scaled up or down depending on usage. Should a bank need to expand geographically to accommodate a merger or acquisition then scaling up their data storage is seamlessly handled through the cloud. Furthermore, certain cloud solutions decouple storage from compute, so organisations only need to pay for when they are using a service.

Given the tangible benefits of cloud adoption, it is hardly surprising the worldwide public cloud services market is forecast to grow 17% in 2020.The financial industry is finally starting to leave behind its legacy systems and embrace a future of modernisation, made possible through the cloud.

The speed of the COVID-19 crisis has shocked us all. Any assessment of the scale of the human tragedy or the impact on the economy risks being out of date in short order. Our financial sector is at the forefront of the COVID-19 impact on the global economy given the integral role financial services play in the economy. For Banks, one conclusion we can make with confidence is that this time is very different from the global financial crisis in 2007-2008.

The COVID-19 crisis is having an immediate impact on the real economy as travel is curtailed and business activity, especially consumer led sectors such as hospitality and travel, has dropped precipitously. In contrast during the crisis of 2007-2008 the broader economy entered a recession due to issues that originated in the financial sector.

The U.S. banking system is significantly stronger than the last crisis with amounts of capital and liquidity far above required regulatory amounts having been built-up since 2007-2008. The U.S. regulators confirm that in the United States “the largest banking organizations hold $1.3 trillion in common equity and $2.9 trillion in high-quality liquid assets (HQLA).” The banks have sufficient capital and liquidity to support their corporate and retail customers through this difficult time (which is what regulators, politicians and the public will expect them to do). Furthermore, some large U.S banks recently announced they will conserve capital by suspending stock buybacks.

Of course, the experience of regulators, banks, and authorities during the last financial crisis has informed a wide range of actions during the last ten years meant to strengthen banks, including stronger capital and liquidity requirements. This has also included a focus on managing the range of operational risks that are critical in dealing with this crisis, including not losing sight of new cyber threats that may surface as a result.

What are U.S. banks doing today? Their most immediate priority is to ensure continued operations of their business by implementing business continuity plans (BCP) lead by senior management. These plans will focus on ensuring the safety of their staff and customers. Key actions given the risk of COVID-19 will include firewall type arrangements such as separating staff into various teams working from different locations and even sub-teams with such mundane arrangements as using different building entrances etc. The investment in duplicate facilities and capacity, enabling banks to continue to operate such activities as trading floors and processing centers, is integral to a robust BCP. Aside from the new physical aspects of operating, banks will also need to address the cultural and behavioral aspects of remote working models at a scale not previously imagined.

Given the immediate impact the COVID-19 crisis is having on the real economy through job losses and business closures, banks have customers who are now unable to make loan repayments and pay credit card bills, etc. The U.S. regulators are encouraging banks to provide relief to individuals whose changed circumstances mean they are unable to service their obligations (this includes not requiring a relaxation of loan terms to trigger a downgrade in the loan classification) or need relief from such charges as early deposit breakage fees and ATM fees. Many companies have a near-term liquidity squeeze that will look to their banks for relief and support.

How will Banks proceed after their near-term crisis management? The direct impact of the COVID-19 crisis and the various actions taken by Central Banks and governments worldwide will have long-term ramifications for Banks. For example, the monetary policy resulting in record low U.S. dollar interest rates will adversely impact the profitability of U.S. banks.

The credit quality of banks’ loan portfolios will deteriorate due to the forecast now of a global recession (S&P Global forecasts effectively zero growth in the U.S. for 2020). The rapid increase in job losses will soon have a material impact on retail credit costs, including mortgages and credit cards. Banks with exposures to companies in the industries most adversely impacted will likely soon experience significant deterioration of their loan portfolios and sharp increases in the cost of credit. For larger companies, their inability to access capital markets will likely increase their reliance on banks for some time to meet their funding needs. While there were already some signs that the 10+ year benign credit cycle was coming to an end, it is almost certain that this will now accelerate, leading to some weaker companies no longer being able to access credit unless there is significant governmental intervention.

Some trends will continue as before this crisis. The investments that banks are making in technology to create a digital environment, including moving more transactions to online banking, will likely accelerate. The “lower for longer” interest rate environment and increasing credit costs mean that improving efficiency will be an even higher priority, including reducing branch footprints and implementing radical new ways of working that won’t require as much commuting to high-rent central business districts. Longer-term, these industry dynamics provide an even greater incentive for increasing the pace of industry consolidation (there are over 5,000 banks in the United States).

Banks in the United States have exceptionally strong balance sheets and liquidity positions. Furthermore they are better prepared than ever operationally to handle this crisis. We are still learning about both the human impact and the impact on the real economy of this crisis. Although, for banks, we already know they are better positioned than ever to fulfill their role in supporting a strong financial system while meeting their customer’s needs during this challenging period.

Mark T. Robinson, a Senior Advisor to Cedar, is a banker with an extensive banking career including as CEO of ANZ EMEA, CEO of Citi South Asia, and, most recently, as CEO of a UAE based bank. He has a BA and MBA from the University of Chicago.

 Coronavirus or COVID 19 has triggered an economic collapse globally over the past few months and experts say that the worst is yet to come! Coronavirus has dealt the last nail in the coffin to an economy already burdened with unprecedented debt levels and company valuations.

The stock markets globally have gone into a freefall with major indices falling between 10-20% in the past couple of weeks, with all major countries entering a bear market (>20% decline from 52 week highs). While the biggest losers have been the tourism, aviation, hotels, energy and leisure sectors, the slump in oil prices has sent shockwaves across a global economy that is already staring down the barrel of a meltdown.

This article attempts to dwell deeper into COVID 19’s impact on the financial sector, more specifically the impact on banks, banking technology companies and fintechs.

Banks, the vital cog to any economy, are facing multifold challenges. While the 2008 financial crisis was attributed to sub-prime mortgage loans and the real estate bubble, it is no secret that the 2020 meltdown will be attributed to unprecedented levels of corporate debt. Let’s lay out some of the key challenges:

1. Significant downturn in bank valuations driven by plummeting stock prices
2. Large drop in transaction volumes among business and retail customers reducing fee and commission incomes
3. Pressure on net interest margin, arising from multiple reductions in interest rates by central banks globally
4. Adverse impact on credit quality and rising NPAs initially triggered by ‘zombie companies’ and then SMEs. The impact will be magnified by companies operating in ‘code-red’ sectors such as tourism, aviation, leisure, energy and oil and gas which can result in mass bankruptcies, unemployment and negative economic growth

The chart below takes the top 20 banks globally with the exception of China Construction Banking Corp and depicts the total decline in their stock prices over the period 24^th February to 13^th March 2020.

The average bank stock has declined ~29% over the past 20 days, with the median decline at ~33% and experts fear that this is only the beginning of the colossal damage that lies ahead. The range of the stock price decline is ~57%. Liquidity issues coupled with slowdowns in credit growth and fee income are all set to manifold in the coming days and the situation ahead looks grim to say the least. Regional and country specific trends are becoming apparent as well, for instance, if we were to consider the sharp recovery of the Chinese markets and ignore their numbers, the averages share price decline climbs to ~36% and the median decline inches up to ~34%. The Japanese banks have fallen ~29%, American banks ~28% and worst yet, European banks have fallen a staggering ~48%.

Let’s turn our attention towards banking technology companies and fintechs. While the former is expected to be hit severely, the latter could emerge as a dark horse. FinTechs that provide innovative offerings using digital solutions could potentially emerge as winners. The same can’t be said about banking technology providers running multi-billion dollar technology transformation projects across the globe. Let’s dissect some of their biggest challenges:

1. The current business scenario poses a significant risk to current projects in terms of time and cost overruns, project delivery and profitability and in some cases could escalate to project standstills and closures. Banking technology companies globally are plunging into Business Continuity Planning (BCP) mode.
2. If substantial risk to current projects wasn’t bad enough, a substantial and adverse impact on revenues going forward is expected as a result of delayed proposal approvals and pipeline conversions, which could topple firms into cost cutting mode
3. Team members stranded across the globe and COVID 19 infected teams add up to severe company-wide ramifications and people related liability. Additionally, in light of project delays and closures, unprecedented pay cuts and lay-offs will be seen

The chart below takes the top 20 banking technology companies and shows the total decline in their stock prices over the period 24^th February to 13^th March 2020.

The average banking technology stock has declined ~23% over the past 20 days, with the median decline at ~22%. The decline’s range is ~53%. Banking technology companies are yet to see the full impact of project overruns and other risks to on-going large-scale projects, which has sent leading companies into Business Continuity Planning (BCP) mode. American banking technology companies are down ~19% and Indian banking technology companies ~21%. Now, if we were to look at the impact on Europe’s leading banking technology providers, with the exception of Adyen, the average decline inches up all the way to ~32%.

At this stage, the global outlook looks forlorn with most leading investment houses predicting a US and EU recession by July 2020 and many fearing that it is already here. However, even these treacherous times present some opportunities for banks, banking technology companies and fintechs.

Banks with surplus capital, a strong balance sheet and end to end digital services stand to emerge as winners in the medium to long term. In the immediate term, banks will look at end to end digitization in a lean and fast-tracked manner to ensure that all products and services can be accessed digitally. Already 72% of UK consumers and 62% of US consumers carry out majority of their banking online and these numbers are only set to rise globally given the restrictions and lockdowns enforced globally. Banks will look at strategic branch consolidations and branch closures to save costs and resort to pay cuts and layoffs where necessary.  Challenger banks with a full gamut of digital services and digital only models could emerge as winners based on how they harness the opportunity and how quickly they can onboard new customers and up-sell, cross-sell existing customers.

Banking Technology companies with a proven track record in cloud-based delivery (SaaS solutions) and offshore services could emerge as winners among the losers. These are primarily banking technology companies that have rode the paradigm shift towards microservices based architecture from a modular architecture which facilitates the effective deployment of cloud-based solutions. Secondly, banking technology companies will be able to answer the vital question; Does remote working work? If so, it could bring down costs significantly, transform the business model and improve bottom lines for companies globally. Lastly, long term opportunities through deferred up-sell, cross-sell and collaborations exist for companies that continuously exceed client expectations and deliver projects effectively.

It’s a mixed bag for fintechs really. Funding is set to dry up significantly after a stellar 2019 wherein fintech funding climbing to ~$100 Bn.  However, fintechs with targeted product offerings such as early payrolls, chatbots and contactless payments through digital platforms will continue to standout. Cloud-based banking suppliers like Mambu, Thought Machine, nCino and Leveris can emerge as winners. Additionally, banks would be more willing to work with agile fintechs now more than ever before as they look at targeted solutions from fintechs in the leanest, quickest and most cost-effective for their short-term fixes and transformations.

One thing is for sure, a daunting 2020 beholds with many challenges and some opportunities!

Written By,
Sooraj Mehta
Cedar Management Consulting International

By Ashok Kadsur, Founder, SignDesk

Banks and NBFCs in India are experiencing a sudden downturn in business due to the ongoing COVID-19 epidemic, with over 80% of companies reporting a decreased cash flow and the lowest reported economic growth rate in six years, according to FICCI.

Why are financial organizations feeling the pinch?

Banks and NBFCs rely heavily on the maintenance of a steady cash cycle to keep their business afloat, and loans are a crucial part of this cycle.  Loan processes are now facing considerable disruptions in India. There are two reasons:

First, both individuals and organizations have not been taking loans due to the health risks involved in the physical nature of the onboarding and loan disbursement process.

Second, businesses are trying to stay put and weather the storm by reducing their financial activities, such as taking loans.

Addressing these two reasons will go a long way in returning the activities of banks and NBFCs to normalcy post the COVID-19 pandemic. But how are they being treated?

How digitized loans are helping fix the problems?

Digitizing the loan disbursement process is a quick and easy solution to this two-pronged problem, as it reduces the health risks of obtaining loans to zero. It is because no physical contact with other individuals is involved in the digitized loan process.

Additionally, the low cost of onboarding and the reduced turnaround time of digitized loans lowers the financial burden of loan disbursement on banks and NBFCs, allowing them to offer mortgages at lower rates to businesses that are reluctant to obtain loans due to the financial implications.

Therefore, by adopting end-to-end digitizing of the loan disbursement process, banks and NBFCs are beginning to get their businesses back on track while ensuring profitability.

End-to-end loan digitization 

Start-ups are already offering end-to-end loan digitization solutions to banks and NBFCs. Chief among these start-ups is SignDesk, which provides a catalog of digital onboarding and documentation solutions to digitize loans.

SignDesk’s Video KYC product, scan.it, is used to digitally onboard customers. Following this, a loan agreement is ratified digitally through the online payment of stamp duty, via stamp.it. The loan agreement is then signed digitally and executed using ink.it, an e-signature workflow solution. Finally, payments on the loan are automated with link.it, an eMandate workflow solution.

In this way, the entire process can be completely digitized, thus reducing the risks of obtaining loans and injecting some much-needed stimulus into the financial ecosystem.

(Disclaimer: The views and opinions expressed in this article on Coronavirus (COVID19) are those of the author and do not necessarily reflect the views of  IBS Intelligence.)

CEO letter from Klaus Holse at SimCorp

In the next decade, asset management M&A will be an important trigger in containing cost growth, but this alone will not create scale and efficiency. Clear operating models and integrated systems are critical to supporting success.

Key to providing this, are vendors who can take up the role of trusted partners, to expand their services and open up platforms, for long-term scale and AUM growth.

With a spell of new M&A deals already at play, it is safe to predict that in 2020 we will see the consolidation of the institutional investment industry continue at pace, in order to stem outflows and stay relevant in the long-term. In February alone, we saw the buyout of Merian Global Investors by rival firm Jupiter Asset Management and US fund giant Franklin Templeton acquire Legg Mason. Meanwhile, Morgan Stanley bolstered its wealth management business by purchasing E*TRADE.

M&A is no silver bullet
While global AUM growth, largely fuelled by Asia, may paint a positive picture, global asset management cost growth continues to exceed organic revenue growth, according to recent findings from Mckinsey & Company. Meaning on the other side, is a tale of falling profit margins, where fee compression and unsustainable operational leverage are joined by a growing assault of market pressures.

Beyond short-term AUM growth, M&A needs to take a good look under the hood, to first rationalize the high operating leverage impacting profit margins. Today, AUM growth no longer guarantees as much revenue as it once did. In fact, according to Bain & Co, it now takes more AUM to generate the same amount of revenue as it did 10 years ago, squeezing the spread from 15bps in 2007, down to an estimated 8bps by 2021. In this tough climate, the key to protecting margins will be tighter control over costs. Investment operations in particular are increasingly contributing to the overall cost base of an asset manager, with costs in North America growing twice as fast as Western Europe.

While M&A can be considered a good starting point in bolstering a firm’s defenses from these market pressures, on its own it cannot create the scale and efficiency needed for long-term success. To build true scale and address the market challenges standing in the way of future prosperity, will require a fundamental shift. Moving away from the traditional operational status quo, of costly legacy systems, fragmented point solutions and outsourcing, to a clear operating model that can streamline a firm’s architecture, and form an integrated backbone across operations. Ownership of data will be a core element to this, strengthening cost efficiency, scalability and delivering significant value to a firm, in a way that outsourcing simply cannot provide.

Delivering everything as a service
The bottom line is that asset managers will need to deliver more value at less cost. To achieve this effectively, we will inevitably see a significant shift in the way vendor services are consumed, and while many in the industry play catch up to a front-to-back way of service delivery for their clients, the goalposts are already moving. If we, as vendors, are to fully meet the needs of asset managers, both today and in the future, it will no longer be enough to simply provide a front-to-back platform in isolation.

While in the past, firms acted as fortified islands when it came to their operations, the future will necessitate open platforms supported by managed services and not tools and technologies alone, to truly aid M&A efforts and solve both industry and firm-wide challenges. Here, vendors in the industry have a significant role to play, demonstrating how greater value can be achieved, by delivering beyond their traditional remit. By forming trusted partnerships, vendors will need to manage a wider footprint of investment management operations, delivering everything as a service. Empowered by the cloud, vendors will need to take over the time-consuming maintenance of the systems, processes, and data owned by the asset manager, while also being more accountable for tangible business outcomes.

With the changing needs of institutional investors, the onus will be on vendors to provide a holistic, full-service approach, with proven faster time to value and reduced operational burden, risk and cost. This will not only require a higher degree of support but also responsibility from vendors if they are to increase efficiency and demonstrate additional value and expertise across the investment chain successfully.

Take, for example, data management, which continues to create significant cost and a drain on already burdened operations teams. Vendors can support firms in capitalizing on the mountains of data they hold, by utilizing an open platform, augmented by a host of managed services. The combination of which can rationalize the incredible volumes of market data that presently floods the front office. At the same time, it can liberate firms from arduous and costly data-driven reconciliation. Ultimately, this delivers one source of truth for all processes, enabling clients to move vital resources and manpower away from firefighting data and instead onto alpha-generating tasks.

The battle of ecosystems
As well as managed services that enable firms to focus on the core of their business, vendors will also need to facilitate the flexibility firms need, to differentiate from the competition and gain an edge. The creation of an open ecosystem is the way in which we believe vendors can deliver this flexibility, along with true optionality – choice without obligation. Doing so will provide long-term scalability and positive change, not just to the industry’s financial prosperity, but also its social and environmental contribution.

If the introduction of managed services extends the reach and responsibility vendors will have inside a firm’s investment operations, then an open ecosystem is the means to connecting firms outside, to leverage innovation in the broader fintech space. This is fundamentally where we see the next race, beyond that of front-to-back platforms; The battle of ecosystems.

Put simply, open systems are increasingly overtaking those that are closed. Across both consumer and business domains, traditional business models are being put to the test. The creation of a highly networked industry ecosystem, one that enables real innovation, integration and co-creation, will in our view create greater flexibility and drive competitiveness, optimizing both sides of the coin; AUM growth and cost control.

We are already seeing this change towards openness, with the number of cross-vendor/custodian partnerships in the industry, including our own recent integration partnership with BNY Mellon. Today, SimCorp has over 50 partnerships within the industry, but we can easily predict this growing to a network of hundreds of partners, offering services, solutions and applications that are complementary to our core platform and managed services.

While these partnerships form a new co-dependency between service providers to offer something much bigger than themselves, it is ultimately the institutional investment industry that will be its biggest beneficiary. It is here, vendors can unlock further value for clients, taking away the research, development and integration work they would otherwise need to take on themselves, by delivering emerging technologies such as machine learning, in collaborations with a host of FinTechs and start-ups. An example is SimCorp’s recent announcement with New York start-up Alkymi[4], where we aim to solve the industry headache over processing unstructured data in alternative investments. It is here, we feel we can maximize the power and scale of FinTechs, RegTech, cloud and data providers around the world, and even clients themselves, to offer proprietary, third-party and co-created outcomes, via our platform.

2020 will see the institutional investment industry undergo a dynamic transition, as it continues to address the operational baggage that has shadowed its potential for so long. M&A provides a substantial opportunity in overcoming current heightened conditions, as well as reducing spiralling costs. However, it will be the role of trusted partnerships with vendors who can take on more operational responsibility and offer enhanced services, that will be vital in driving the freedom to focus on success. In the battle for ecosystems, the successful partners will be those vendors who can open up their platforms and architectures, to deliver a thriving ecosystem and abundant opportunities for long-term, sustainable growth.

Here, SimCorp is optimally placed, being neither asset manager nor custodian and with only the ambition to drive value and the outcomes that support our clients’ success.

Klaus Holse
CEO of SimCorp

By Bhavin Turakhia,Founder and CEO of Zeta

Are legacy banks operating on borrowed time?

At first glance, it may seem like banks and technology are in a warm relationship. In reality, there’s a great distance between both sides — so great, that both parties are missing out on what the other has to offer during these difficult times.

Banks are yet to optimize the full potential of technology. This pressure builds on as the tech industry is independently coming on board the financial services wagon with new-age fintech offerings even as the entire system has been disrupted due to the novel Covid19 pandemic. But, the good news for traditional or legacy banks — as they are known — is that they still lead the charge when it comes to owning the suite of exclusive banking services and products like accounts, cards, and regulatory features. It is something that FinTechs are still procuring.

But, the race has just begun. In the wake of these changes, how can banks revive their entire ecosystem without changing their core?

Moving with the Covid19 times:

Technology advancements, combined with consumers’ demand for digital banking experiences, are what’s pushing the banks towards a digitized future. According to global reports, it is inevitable for banks to modernize its processes to stay relevant and profitable rapidly. It could include SaaS or cloud-based services to boost the banks’ existing core technology.

While all this is lurking behind the balance sheets of banks, traditional banks are still bound by their legacy core systems. With few exceptions, most of the leading banks in India run their core banking operations on older platforms and several of their products on antiquated software. And, most of these cannot cope with the ever-evolving needs and demands of digital-native customers.

Often homegrown, these platforms lack the agility to adapt and can’t be quickly modernized as per the market needs. Banks can take on these changes by being proactive. It starts by creating products that meet the customized needs of the customers.

Rise of digital finance:

In this banking game of thrones, banks are no longer competing with each other, but with everyone offering financial services. Digital experience has set a new benchmark for banking products and services. It stems from the growing digital-native customers, who are critical of new products that are led by speed, transparency, convenience, and security.

All this builds up to modern banking experiences, where understanding the customer is critical. Thus, leading to trust and customer retention.

The critical equation that banks need to solve is how can they revamp their complex legacy systems and make way for modern experiences without leaving what’s core to them.

Encompassing the digital core:

A bank cannot go completely digital without the renewal of its core systems as it requires advanced banking intelligence that’ll help in altering their strategy, to cope up post Covid19 crisis: Things they need to keep in mind:

• Own their customer experience: Designing the right experience to meet current customer expectations is critical for success in today’s open banking era. For instance, when a customer approaches a bank for a savings account, he/she is already in the know-how of what they want. To further enhance this ask, banks could proactively offer banking experiences for the whole family and not just the individual. It could include looking at offering add-on experiences in the value chain like a spending tab for children, setting monthly expenses tab, and so on. It can be done by understanding the full scope of customers’ needs, making the whole experience inclusive and complete.

• Enhance their core competencies: Building a digital core also requires banks to ease their employees’ tasks, so that they can focus more on the consumer. It means assisting employees in breaking down the context behind banking transactions, simplifying control centers, and more. It will help employees get a complete overview of what customers need and the ability to deploy solutions faster. Thus, focus on the end-to-end customer retention cycle.

• Offer integrated services: With a robust digital core, banks can provide integrated services to both its internal and external base. Thus, helping them to own the complete banking ecosystem; while making way for new business opportunities. A digital core has the potential to help banks mould their offering with simplicity and speed. It includes managing regulation changes, operational enhancements, and more.

The best way forward would be to adopt a low risk, transformation model that keeps banks through the core functionalities, while offering modern banking experiences. The critical thing to watch out for during this change is scale, personalization, and time for delivery.

It is no secret that banking and finance are leading a frenzy of change. What was once dominated as services from banks and other traditional financial institutions, is now coming back to bite the whole finance sector. The winner in this game will be those who can shake this inertia at the earliest.

(Disclaimer: The views and opinions expressed in this article on COVID19 are those of the author and do not necessarily reflect the views of  IBS Intelligence.)