With challenges comes change and banks have stood witness to a massive behavioural change over the past few weeks of global turmoil. As the internet took a centre seat in every household across India, even the most reluctant of customers was forced to navigate their way through internet banking. This accompanied by the re-activation of dormant customers, all looking to make non-cash related payments through IMPS/NEFT/UPI etc., purchase goods or services or transfer funds, saw internet banking KPIs sail well past their yearly targets.
Opportunity for Banks
With the current market scenario spooking even the most seasoned investor, we are likely to follow a trend of withdrawals from the equity market and deposits into safer term deposits for the foreseeable future. With saving bank interest rates also falling, even the slightest variation in a bank’s offering can lend them a competitive edge in acquiring new customers. Even though bank liquidity would seem higher for the present quarter, eventually when the manufacturing and consumer goods markets come into action, bank’s assets would be re-directed into these segments. This gives banks a huge opportunity to expand their existing customer base and onboard new customers at the present time.
But how can banks seize this opportunity and reach out and onboard new customers in a time where our world has shifted from outdoors to online?
The Silver Lining
In its circular dated 9th January 2020, Reserve Bank of India enabled the onboarding of customers remotely through digital channels, using a Video-based Customer identification Process (V-CIP). A savvy bank can now stitch together a customer’s experience that seamlessly conducts the following.
1) Video-based Know Your Customer (V-KYC) for customer onboarding
2) Open savings and fixed deposit accounts
3) Transfer money into these accounts
These legs of the user’s journey with a new bank, which earlier took hours, possibly days and multiple trips to the bank, can now be completed within 3 minutes!
#KeepMoving with Kwik.ID
Think Analytics was quick on the uptake and released a coherently designed Video-KYC solution, Kwik.ID to enable banks to enter the digital era of customer onboarding.
1) The 3-Minute journey captures the following steps essential for a user to complete KYC.
2)Take a selfie
3)Provide proof of possession of Officially Valid Document (OVDs)
Answer a few random questions to ensure liveliness
With over 50,000 KYC sessions successfully completed, endless learnings extracted and incorporated, Kwik.ID is a succinct tool which can be used for 3-minute customer onboarding, optimizing agent bandwidth and managing customer experience.
Krzysztof Pulkiewicz, CEO and Co-Founder of banqUP
By Krzysztof Pulkiewicz CEO and Co-Founder of banqUP, a Polish-Belgian API aggregator connected to 78 banks in 10 European countries.
On 14 September 2019, PSD2 went into full effect all over Europe. It made possible for a third party to connect to banking APIs to obtain the history of clients’ accounts, make a payment or check the availability of funds. In theory, it would cause a new generation of banking apps that will bring new quality to banking clients. However, the development of new solutions is not as fast as many would like to.
The UK, with its Open Banking Directive that came into force in January 2018, is far more evolved than the rest of Europe. Therefore many Open Banking solutions (like Revolut’s account aggregation) are only available in the UK.
Even the most innovative banking players, like KBC or ING, are locally connected with 4-5 different banking partners at most.
Why is it hard to get into Open Banking as a new player? banqUP – a platform that aims to create ‘one API to connect all banking APIs’, similarly to what Plaid is doing for the US Market, and already connected to over 50 banks from 8 countries in their aggregator platform, has some interesting views on this subject.
Lukasz Chmielewski, banqUP’s CTO, says that the APIs provided by banks are pretty different across different API standards, but not only – “each bank has a different approach to how it complies with PSD2 directive. There are a number of pain-points that we observed across very different national and multinational API standards and their implementations in Europe”.
Too little sand in the sandboxes
Very often sandbox/test APIs provided by banks significantly differ from the final API.
“We have encountered sandboxes that, by design, offer around 10 per cent of the functionalities of the production API. When asked – the bank’s response was ‘it’s to make it easier for third-party providers (TPPs)’. Not sure in which way,” Chmielewski says.
Why is this a problem? Sandbox should be a tool for a TPP company to test their solution to later seamlessly connect to access real data. It should also allow any entity without a TPP license to build its solution.
“Before we got our TPP license in December we basically had no idea how accurate our connector is. Only after deployment to our TPP client, we have learnt about the scale of differences. And most third-party service providers are still in this inconvenient situation,” the banqUP’s CTO notes.
Lukasz Chmielewski, CTO, banqUP
Sandbox stability may also be an issue. It seems logical that the sandbox environment may be less stable than the production one, but the banks are obliged to inform their partners about any changes to a production API that may cause failure to connected applications (usually a few months prior to their release) but not to the sandbox. However, some basic level of reliability is required to make sandbox useful.
Piotr Szyperski, banqUP’s Lead Developer, explains: “When it comes to sandbox change reports, we have had cases where the changes have been communicated to us 20 minutes before their release to the sandbox Automatic tests depending on sandbox APIs almost never work for a full set of banks. We had to design the process to automatically disable/enable sandbox tests based on health checks, as instabilities occur very often.”
Non-standard standards
Another issue TPPs face is the differences within a single API standard. Mostly stemming from different approaches to the guidelines. There are banks that only support most basic scenarios, ignoring the fact that according to their API standard they should support much more. For example, some of them allow only standard payment and neither recurring payment nor scheduled ones are supported. These seem minor issues but often whole business cases can be (or are being) built around those missing features.
“Some banks follow standard to the letter, some decide to add additional functionalities or features. Others decide to ignore some elements of the standard, claiming that they are not useful,” Szyperski says.
“Standards are usually treated by banks as guidelines or inspiration only. Even if they are strictly followed, they still leave a lot of room for interpretation. Multiple optional fields, a lot of alternative paths and missing elements that most REST APIs possess – all these make the banking APIs far from perfect,” he adds.
“However, there are standards with more precise requirements. One good example is the Polish API. It is precise enough to result in very similar implementations of both AIS and PIS services across the whole country.”
Growing pains
Chmielewski says: “From our perspective it seems that both people responsible for PSD2 standards and those implementing them have been focused either on maximizing the security of the API or minimizing the effort of implementation, having internal banking architecture in mind.”
“Moreover, it seems that in some cases, after the bank has addressed the minimum regulatory requirements regarding PSD2, they invest much less of their resources and focus on improving the quality of API, especially sandbox. It may be somehow understandable, but still may slow down changes related to Open Banking.”
On the bright side, most banks approach support very seriously. They have appointed contact persons to handle API reports or even set up small departments. There are only rare cases where the answers are not helpful or take longer than one day on average.
“Many of the issues we have described stem from the fact that we are often one of the first entities that connect to a given banking API. We are observing a steady increase in stability and usability of the APIs, even though it is not necessarily rapid,” Chmielewski says.
“Reactions from banks to our feedback are also usually very constructive and positive. We believe Open Banking, with a proper set of tools simplifying connectivity, might soon become a game-changer it was hoped to be,” the banqUP’s CTO concludes.
In a global first, all the major UK acquirers have come together to show collective support for businesses impacted by the COVID-19 crisis and share their views on what businesses can do during the lockdown while protecting employees and maintaining social distancing. These top tips come from all the major UK acquirers/ISOs and are designed to help business who may not accept cards or operate online understand their options to adjust how they accept payments.
UK acquirers recognise their smaller business customers are facing an unprecedented set of challenges. “Whether you’re a business that has relied on face-to-face shops and you want help setting up a website, or you’re looking for advice on how to keep your business and its customers safe from fraudsters, we are here and ready to help,” Rob Cameron, CEO of Barclaycard Payments, who process almost 40 per cent of UK transactions, comments.
The following best practice list is based on suggestions from senior executives from across the UK’s leading card acquirers. They are designed to help those who cannot open their doors as well as those who can still provide takeaways and deliveries.
Pete Bettles, UK & Ireland Chief Operating Officer of Global Payments
“It’s important that we work together to identify new ways in which customers can continue to trade,” Pete Bettles, UK & Ireland Chief Operating Officer of Global Payments, says. “We recognise that, for our customers, maintaining trade is critical both for cashflow and retaining consumers’ loyalty.”
1. Pay Online
Getting online, or extending your current website to take payments, has the advantage of tapping into a fast-growing area of the market both within the UK and abroad. If you have a website but don’t yet sell via this channel, many card acquirers such as Stripe or PayPal can get you taking payments within an hour. If you are not yet online there are services such as Shopify or WIX within which you can build your site and take payments.
Lola’s Cupcakes, a premium bakery with multiple outlets in South-East England, has completely repurposed its business during the lockdown. The company has worked with its payments provider Elavon to develop a new online buying process and transformed itself into preparing fresh grocery boxes for delivery within a 48-hour window.
Similarly, in the restaurant sector, Paymentsense has just launched a service called BiteBack. This allows restaurants to put takeaway menus online and reuse existing in-store acquiring contracts. “With BiteBack we want to help businesses operate as a takeaway almost instantly and keep them trading as a result,” Guy Moreve from Paymentsense says.
2. Pay via email
Emails can also be a useful way to take payments. Many card acquirers have products which allow you to embed a payment link into an email that presents a simple payment page with a value set by you. Emails can be generated after a customer has called, or after a visit to your website. The email should contain details of the order to allay any potential concerns about email phishing scams. This method also benefits from secure processing which can ensure the costs of any fraud are taken by the customer’s card issuer rather than you.
“Through our ‘Pay By Link’ product we allow merchants to offer a simple and effective facility for consumers to pay remotely without the need to build a website,” Pete Wickes, SVP Corporate at Worldpay by FIS, says.
3. Pay over the phone
If you already have a payment device, one quick and easy solution is to take orders and payment over the telephone. This approach is particularly relevant for businesses whose customers may not be online or who have concerns about using cards online.
“Most counter-top devices can be used to enter card details provided over the phone,” Simon Stanford, SVP Small Business at Worldpay by FIS, says.
Worldpay has been working with Aroma Coffee & Kitchen in Glasgow to turn their sit-in café into a delivery service. “The card terminal was activated remotely without us having to do anything. The next day we were up and running with telephone payments,” Heather Gilchrist, the owner of Aroma, says.
This approach does have its downsides. Taking orders over the phone can be time-consuming, there are additional fraud risks, and card details must always be typed directly into the terminal, never recorded anywhere else. However, acquirers can help mitigate these risks.
4. Use social commerce
Companies who have built up a following on Instagram, Facebook, Twitter or other social media should consider allowing these customers to buy via these channels. Global Payments is launching an app that enables small businesses to take payments online through their social networks but without the need to set up a separate website.
Nick Corrigan, UK&I Managing Director & President at Global Payments
“Our social commerce solution is a hugely relevant and easy way for businesses to leverage the reach and engagement of social networks in an engaging manner,” Nick Corrigan, UK&I Managing Director & President at Global Payments, says.
5. Contactless for takeaway
If customers are still able to come into your shop to take away food or essential products, you should use your existing countertop contactless payment device. This helps you to protect those working in stores and maintain social distancing in line with guidance.
From 1 April 2020, the contactless limit of £30 was raised to £45 and as Guy Moreve from Paymentsense points out, “our data show the average purchase in segments such as hardware, pet or garden stores now falls within the contactless limits”. Encouraging your customers to use their Google Pay or Apple Pay also has the advantage of allowing them to make contactless purchases of any value rather than being constrained by bank card limits.
6. Payment on delivery
These principles can also be extended to home deliveries. In this case, a mobile terminal, or one linked to your mobile phone (called an mPOS) allows consumers to pay via cards on their doorstep. This can provide an alternative to cash where customers may have concerns about COVID-19 infections, or they have not been to an ATM recently. iZettle and Square are popular mPOS choices and Elavon is supplying mPOS terminals to help companies take payment upon delivery in the UK.
“We are helping businesses find new ways to provide food, pharmaceuticals and other essential supplies to people at home and those who are isolated or vulnerable,” Hannah Fitzsimons, President and Managing Director at Elavon Merchant Services, Europe, says.
7. Mobile commerce
Many people in the UK are already familiar with using their phones to order their food or other essential products and services. While platforms such as UberEats or Deliveroo generate attractive volumes of customers, they can be relatively expensive. You should therefore ensure your website is easy to read on a mobile or you may want to consider creating your own app.
“Mobile commerce is the fastest-growing channel for retail and generates over 30 per cent of revenues for some of our clients. The phone is becoming the most important customer engagement device because it is always to hand, even during a lockdown,” Chris Jones, Managing Director of PSE Consulting, who provide expert payments advice to both acquirers and merchants, says.
All of these measures offer a safer way to keep you trading and the economy moving. “Public health and safety during the pandemic remains the top priority,” Dr Jonathan O’Keeffe, Chief Medical Officer at London Health Systems, an international occupational and corporate health consultancy, says.
He adds: “The economy plays a major role in sustaining our health in the long term. Commercial enterprise and trade allow us to fund our health service and social care systems. Payment solutions that both support and respect the need for ongoing social distancing measures and facilitate cash flow to business are needed to enable us to resume productive, healthy lives.”
By Neel Juriasingani, CEO and Co-founder, Datacultr
How Telcos can ‘lend a hand’ towards smartphone adoption in India
Over the last couple of decades, the Indian telecom industry has become a global case study of fast-paced-mass adoption. The transition of subscribers from fixed-line telephony to 2G, 3G, and 4G has been astonishing, by several measures. The growth in smartphone adoption has been further fueled by the Government’s push to position the country as a global hub for manufacturing and successfully bringing leading brands to produce and export phones from India.
However, as the country of 1.3 billion expects to have 859 million (~84% population) smartphone users by 2022 as per a joint study by ASSOCHAM & PwC, the law of diminishing marginal utility has already kicked in. The growth in the number of new smartphone buyers has slowed down tremendously. It is because potential consumers are finding smartphones expensive and are unable to afford it.
Concerns for telcos and revenue flows
It is not only a concern for smartphone manufacturers but also for telecom operators that invest in the tunes of billions of dollars in setting up the infrastructure. These companies make this investment upfront, and revenue flows in once subscribers start using their services.
When the pace at which new smartphone subscribers join the network slows down, the growth in data service revenue for telecom companies will slow down. In other words, they will have large chunks of unutilized internet bandwidth. To change the game, these telecom operators will have to look for ways to make smartphones more affordable, especially for people at the bottom of the pyramid.
We have already started seeing some efforts in this direction, as top telecom providers are partnering with smartphone manufacturers to provide attractive packages, subsidies, and financing schemes. While there is a more substantial business prospect for them, when new smartphone users subscribe to their services, there is always a business risk, in case the buyers do not pay their EMIs on time.
Partnership with FinTechs
Thanks to technology, telcos can now use the smartphone that they are financing as collateral. To do so, they can partner with fintech companies that provide solutions to track the device in real-time. In case the payment is not on time, telcos can send red flag alerts as notifications, block certain features on the device, or even wholly lock the device. The technology also allows telcos to send push messages in rich & interactive formats, which build financial literacy among users. Thus, they understand the importance of paying EMIs on time and maintaining a good credit score.
Given that smartphones are a critical asset and an essential source of income these days, telcos can secure their investment and cover the business risk to a large extent. The technology also builds more confidence among telcos and smartphone manufactures who are looking to innovate bundled offerings to the consumers.
As more people use smartphones, telcos will witness higher utilization of their data services. It helps them achieve break-even on their new investments and hit profitability faster. As far as the longer term is concerned, this investment by telcos will help in strengthening the momentum of smartphone adoption in India and support the Digital India movement.
(Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the views of IBS Intelligence.)
#1 INNOVATE The world is changing faster than you think. Being distinctive and innovative is key to your survival and success. Create a top 10 list of innovation ideas you can implement across all functions of your business in 2020 and get it done. As Nike says, Just Do It!
#2 FOCUS, FOCUS, FOCUS Focus is everything is life. Nothing can be achieved without focus. Pick the areas you want to go after and then put all your resources behind them. The real challenge will be – can you stay disciplined and avoid the distractions? Sometimes it is better to have the blinkers on!
#3 DRIVE ENTERPRISE VALUE Customer is king, and your human capital is valuable, but what about the shareholder? Time to give them some tender loving care. Listed or unlisted – track your enterprise value monthly. More importantly, for every main strategic initiative, ask the question – how will it drive enterprise value?
#4 IT’S ALL ABOUT THE CASH Cash still remains king. Sometimes it good to learn some lessons from the often criticized PE industry. Measure your business on cashflow. Run it like a shop. When your shutter goes down at night – how much cash did you bring in?
#5 DISCARD & ADD Too many companies sink under the weight of too many products they like to sell. 20% of products generate 80% of revenue. The tail is always too long. Have the guts to discard products that don’t generate revenue and add selectively to drive your innovation agenda.
#6 ONLINE IS KING Your channels are changing as you sleep. While your office and stores are shut, the customers are at play. Fastest finger first on their favorite online sites. Make being a best-seller on the #1 online channel your priority. Getting online right could make the difference on whether you live or die.
#7 THE NEED FOR SPEED Patience is out of style. Customers want everything now. Clients wanted it yesterday. If you can’t take care of them, somebody else will. Online has made the world flat. Crash the turn-around-times of every key process in your organization. Go Formula 1!
#8 UNLOCK YOUR HUMAN CAPITAL People are important, but not at the price of success. Structure right, have the right headcount and competency, but more importantly create a performance oriented organization. Reward the performers and clean up the tail every year in a humane way – yes, it is possible to do both together.
#9 GO COOLTECH, GO DIGITAL The world has gone digital. Maybe this time the trees can really be saved. Automate to the maximum. Word’s like AI, Machine Learning, Robotic Process Automation are not Latin anymore. Simple applications using these technologies are available for all businesses. Use them. The robots have arrived!
#10 WORK & LIFE CAN BE BALANCED! It’s true. Starts with your cell phone. Look at it every hour or two during the work day and once every evening at the most. Twice on the weekend. Sorry I can’t be more generous. And focus your free time on your family and friends – not Netflix. It is possible to work hard and play hard.
Have a great 2020, and see you on the other side of the calendar!
By Andreas Hauser,Senior Business Product Manager, Real-time Reporting and Innovation Cash Clearing, Cash Management, Deutsche Bank
If a client were to ask its bank why a payment had not been fulfilled, is it really acceptable for the answer to be: “We don’t know”? Real-time liquidity benefits are ready to seize in the here and now. With the right application and a consistent consumption of real-time account information, banks can have a clear view on their current liquidity situation.
Flashback to the year 2008 and the height of the financial crisis. A counterparty has just defaulted on a sizeable payment to a large global bank. The bank is highly sensitive to changes in its intraday liquidity positions, so immediate action is required. Unfortunately, the bank lacks visibility over its intra-day payment flows and is therefore unable to respond to this situation quickly and decisively. Without the necessary liquidity the bank finds it hard to mitigate the negative impact on its own time-sensitive payment obligations and the situation begins to snowball – spreading from one bank to another before the end of the business day.
The potential for such scenarios was an obvious red flag for regulators. Something had to change and as a result, the Basel Committee on Banking Supervision (BCBS) proposed guidelines in 2008 and 2013, known as BCBS 144 and BCBS 248 respectively, recommending principles for banks to track their liquidity flows over the course of the business day. Returning to the present day, we find the regulatory emphasis on real-time visibility has even increased, with the incorporation of BCBS 248 into the Basel Framework. However, the mandate of real-time cash-balance monitoring and reporting has yet to materialise across the market.
Andreas Hauser, Senior Business Product Manager, Real-time Reporting and Innovation Cash Clearing, Cash Management, Deutsche Bank
It’s an issue that has receded from the limelight in recent years, but, in this day and age, if a client were to ask its bank why a payment had not been fulfilled, is it really acceptable for the answer to be: “We don’t know”? Banks should have a clear view over their intra-day cash positions – be it on their RTGS accounts or on accounts held with Nostro Agents. It’s the starting point not only in guarding against stress scenarios, but also to manage and optimise their payment flows. Put simply, banks that don’t capitalise on this opportunity are missing out on potentially huge efficiencies and controls.
Maximising efficiency and control
From medium-sized to more specialist players, there are a number of banks with significant cash positions in the main currencies. In any given 24-hour period these positions are likely to vary significantly. Though there is no one optimum pattern – as this depends on the bank’s business models, products and locations – the benefits of implementing the guidelines published by the Liquidity Implementation Task Force (LITF), in response to the former BCBS 248-paper, are clear.
These have been demonstrated in a recent Deutsche Bank study, which compared the daily real-time cash balances from start of day until end of day for four banks across a three-month period. Figure 1 shows a bank that has not implemented a real-time cash-balance reporting strategy, while Figure 2 shows a bank that has.
Figure 1: Non-user of real-time reporting services
Figure 2: User of real-time reporting
At the bottom of Figure 1, the outlined box shows the points at which the account is under-funded. To avoid being short on the account and having time-sensitive payments queuing-up as a result, a liquidity deficit such as this might force the bank to rely on intra-day credit lines, incoming flows or liquidity transfers. In contrast, the box at the top of Figure 1 outlines where the account is being over-funded – meaning that the bank is holding onto surplus cash that could be better leveraged elsewhere. These inefficiencies, resulting from either over- or under-funding, can last for the majority of some business days.
Comparatively, the bank that has implemented real-time cash-balance reporting into its liquidity management strategy, as depicted in Figure 2, suffers shorter and less frequent instances of over- or under-funding and has a clearly defined daily pattern, reflecting a considered strategy.
Seize the opportunities
So why do these benefits remain off the radar for many participants in the correspondent banking network? For a considerable number of banks, industry-wide projects, such as the migration to the ISO 20022 payment messaging standard, are being addressed with a greater sense of urgency. In addition, the development of complementary technologies, including Application Programming Interface (APIs), Distributed Ledger Technology (DLT) and artificial intelligence (AI) and automation, are rising up the strategic agenda.
But history teaches us that the “next big thing” will always loom on the horizon, while real-time liquidity benefits are ready to seize in the here and now. With the right application and a consistent consumption of real-time account information, banks can have a clear view on their current liquidity situation. What’s more, in combination with SWIFT gpi, banks can enjoy improved visibility across all parties involved in cross-border payments, including the status of the payment at each embedded agent. These are upgrades that can be implemented today and pay for themselves long before the ISO 20022 migration has completed.
Machine learning and associated algorithms are making real waves not just in banks’ front offices but also in analysing and spotting trading opportunities in the stock markets.
Machine learning (ML) is being used to identify trading patterns, initially in historical trade and quote data. This may sound familiar to those who are cognisant of technical analysis and the end goal is indeed the same, that is, to find useful patterns in historical and even real time data that lead to decisions that may result in profitable trades either long or short.
According to Tom Finke, head of machine learning product management at software and data provider OneMarketData: “What’s different now is that the techniques have evolved in performing that analysis. In particular, we are able now to use machine learning algorithms to help improve some of the more historical sorts of algorithms that were used to try to detect patterns. When we train machine learning models, such as neural network models, they are able to find patterns that traditional analyses like regression analyses might not otherwise find. These sorts of algorithms are able to find patterns that mere humans are not able to find because of the extent of the vastness of the data that can be analysed.”
An arms race?
Of course, if every trader was to follow the same analytical signals they would all be doing the same thing at the same time. Finke admits that funds, brokers, trading firms, banks and asset managers are facing a “sort of arms race”! He added: If you don’t participate, there is a risk, you’ll indeed be left behind. It would be advisable for investment firms and investment funds that want to stay on top of things that they really should form teams to at least investigate how machine learning can help with their investment and trading decisions.”
But the machines are not completely taking over, well not yet. “It takes some human ingenuity and cleverness, to decide the parameters around those machine learning algorithms. For example, what is the most appropriate data set on which to build a machine learning model?”
Right now, the human element is still required. It takes a person to decide which ML algorithm should be used and what pool of data should be analysed. However, there are companies working on this with ML algorithms being developed with the aim of having them choose which are the best ML algorithms to use.
Watching the markets move
With algorithms being used to analyse trading patterns it should come as no surprise that one way this is being leveraged is in market surveillance. OneMarketData’s core product is a time series tick level database on which that company had built various vertical applications – one of the most popular being trade surveillance.
“We have that particular application being used by a major exchange in the US and by quite a few investment banks. They’re analysing order books; some historically and a few in real time to try to detect patterns that are nefarious such as spoofing or layering [both forms of illicit manipulation in which a trader may attempt to deceive others regarding the true level of supply/demand for a given financial instrument]. Traditionally there are patterns that you can look for and detect to try to find these activities and now we are in the early stages of applying machine learning algorithms to that,” said Finke.
One thing that has changed in the financial markets in the last few decades is the sheer volume of data and number of trades. Finke noted that in the last week of February 2020 when the world’s financial markets became seriously ‘spooked’ by concerns over the global Coronavirus (COVID-19) outbreak, the number of ticks during the volatility was such that “some of our customers were running out of memory in their memory databases”.
Seeking the right signal
ML and the appropriate algorithms are capable of analysing more than just price data. For example, Bloomberg now provide a machine-readable news feed that is tagged to make it easier for computer software to parse the text.
This parsed news may then be stored in the same way as trader quote ticks. Run it through a natural language processing algorithm to parse it into meaningful chunks (a technical term!) and then as stage two use another ML algorithm to decide whether there is enough information to provide a trading signal… and if there is, what should that signal be?
Such algorithms are being developed with the analysis of historical data but once the models are trained, they can be applied to real time streaming news data to try to generate real time trading signals. Sure-fire success in such endeavours is by no means guaranteed. “This still a hard problem. It’s hard for humans, it’s hard for anybody to pull meaningful market sentiment out of newsfeeds. We’re still in the early stages of having any sort of effective results, but that’s certainly not stopping people from making the attempt,” concluded Finke.
By Ramesh Narasimhan – CEO at Ingenico ePayments, India
Demonetisation was a watershed moment in the history of independent India. A decision geared to curb black money provided the platform and impetus to consumers to move to non-cash payment methods, and a slew of initiatives undertaken by the Government of India thereon has catalyzed the e-payment ecosystem in the country, expected to worth USD 135.2 billion by 2023, from USD 64.8 billion in 2019.
With India’s share in worldwide transaction value set to increase from 1.56% to 2.02% by 2023, the country’s e-payment sector is witnessing exciting trends, existing and evolving, which have the potential to catapult the nation as a dominant player in this segment.
Wearables as alternate payment channels
Internet of Things (IoT), which has the potential to bring a fundamental change in the way we interact with our surroundings has not only made objects smarter but has also enabled the seamless transfer of information between devices, organizations, and end-users.
Riding on the burgeoning growth of India’s wearable market, which registered a whopping 168.3% year-on-year growth in 2019, these inter-connected devices have evolved as alternate payment channels.
Last year, Mastercard announced its collaboration with token service provider Tappy Technologies to enable contactless payments through fashion wearables, starting with Timex Group’s analog watches.
Tappy Technologies in a similar collaboration with ExpressPay Card (a JV between China Union Pay and Bank of China) and Saga Watch offered cardholders a wearable payment option, acknowledged by merchants capable of accepting China UnionPay contactless payments.
Sound-based payment – the next big thing
Voice commands have revolutionized the home automation market and could soon sweep the digital payment space. The new frontier in this segment, the USP of sound-based payment system lies in its simplicity and convenience.
With nearly 668.3 million users projected to rely on soundwave technology by 2021, this mode of digital payment can radically change the dynamics of the digital payment sector.
Realizing the potential of soundwave technology, a few companies in the country are facilitating payments through soundwaves without the Internet. Encrypting data from one device to another using sound waves, all one needs to do is to program their device with the software developed by these companies, places the device within proximity of the POS terminal and the transaction is completed within seconds.
Near-field communication payments picking up pace
Also known as contactless payment and tap-and-go, near-field communication (NFC) payments truly came of age when the National Payments Corporation of India (NPCI) launched the National Payment Mobility Card last year, whereby users could make payments just by tapping the terminal, without the need to enter a PIN for transactions below Rs. 2,000.
Like QR codes, which are already quite popular among informal and small merchants, NFC-based payments give users complete control over transactions and the payment process. Following NPCI’s footsteps, many banks and financial institutions came up with NFC-enabled cards as one of their primary offerings.
The launch and success of applications like Google Pay make a strong case for NFC-enabled payment system, which I believe will gain significant traction in the coming days.
In conclusion
With technology taking center-stage of financial services, and the Government’s drive to a less-cash economy, the digital payment segment in India is expected to the breeding ground for innovation and newer opportunities in the coming days.
(Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the views of IBS Intelligence. Ingenico is a digital payments solution provider)
When the world’s second-largest economy gets hit, the tremors are bound to be felt by both large economies such as the US and developing ones like our own.
The Coronavirus (COVID-19)epidemic, with its epicenter in Wuhan, the capital of the busy province of Hubei in China, has claimed more than 3,000 lives and infected over 90,000. It has spread to over 60 countries and sent shockwaves through financial markets. Beyond its pathological implications, lies its impact on the global economy.
The Indian angle
The trade between China and India is worth $87 billion, of which we import goods worth $70 billion from China. It includes everything from electric components and machines, medical instruments and pharma raw materials, vehicles and auto parts, iron and steel components to nuclear machinery.
While China takes 5.1 percent of our total exports, in the form of cotton, salt and organic chemicals, and mineral and metal ores among others, we get 13.7 percent of our total imports from China alone.
Needless to say then, when our second-largest trading partner hits the brakes on its factory output, companies in India break into a sweat.
We may have pushed for smartphone manufacturers to increase their domestic production, but they still depend on China for their components. Other electronic goods manufacturers would also be facing production issues.
A supply shortfall in consumer electrical and electronic goods in India (either due to coronavirus-led Chinese cuts or our economic slowdown) would also trouble online sales, as they form a sizable portion of e-commerce goods sales.
Pharma companies bring in key raw ingredients from China to make medicines. Automobile manufacturers, too, are heavily dependent on their components on their Chinese suppliers.
However, the Chinese New Year in January-February would have proved to be a greater boon than usual as companies would have stocked up by December last year, anticipating the Chinese holiday season.
Goods and services
Goods and services across the world are suffering the aftermath of the quick spread of the Coronavirus (COVID-19). Global exports and imports and Chinese exports and imports are so intertwined that it is unavoidable.
The spillover of disruption has been the most acute in China’s neighbors as seen in their monetary policy responses.
Impact of Corona Virus, DBS Report/Tavaga
Goods movement
Shipping has been heavily affected with curbs on movement to stem the spread of the Covid-19 virus.
Shipping companies have cut back on their ships sailing from China to the rest of the world, carrying goods, to prevent the virus from advancing to other areas.
It has a direct bearing on the world’s supply chain as 80 percent of global goods trade by volume is transported in ships and China itself houses seven of the world’s 10 busiest container sea-ports, says the United Nations Conference on Trade and Development. The contagious coronavirus is a threat to business infrastructure in adjoining countries as well, as Singapore and South Korea, too, have busy ports and have seen the disease escalate.
Global GDP
The global GDP will be compromised due to the economic fallout of the coronavirus. China accounts for around 18 percent of the global GDP (2019) compared to 4 percent when the Sars epidemic had broken out in 2003. Chinese businesses are now more ingrained in global supply chains.
Sars had robbed China of 1 percent of its economic growth in the eight months it had lasted. The coronavirus is expected to shave off 1-2 percentage points off China’s GDP growth in the first quarter of 2020.
Investor takeaway in times of epidemics
Contagious epidemics such as Coronavirus (COVID-19) bring uncertainty to the investing community worldwide, prompting them to move towards traditional assets such as golds and bonds that are perceived to be more stable, instead of the assets with systemic risk like equities.
That is where smart investment planning involving diversification and asset allocation comes in. It allows us to stay out of troubled waters and focus on our health, instead.
(Disclaimer: The views and opinions expressed in this article on Coronavirus are those of the author and do not necessarily reflect the views of IBS Intelligence.)
By Kiran Kumar, Co-Founder and Executive Director of Profinch Solutions.
Growth and relevance are quintessential business matters that keep organizations on the qui vive for opportunities to conduct business more efficiently and profitably while keeping step with changing times. The last few decades saw digitisation and technology emerging as this opportunity – starting off as a differentiator that set the leaders apart from the laggards to eventually becoming the only option available to stay relevant. The tech quarters are now abuzz with Quantum Computing – the nouveau arrive that promises to bring in the new wave of disruption.
Quantum Computing and Financial sector – What’s the fit?
Quantum Computing is a field which applies theories developed under quantum mechanics to solve problems. It entails the use of qubits to represent data as opposed to traditional binary units (0 and 1). Qubits are more flexible and allow for a combination of 0 and 1 simultaneously thus storing way more data than traditional bits wherein data must be either a 0 or a 1.
Quantum Computing’s enormous advantages over traditional computing stem from its conceptual design – the solution space of a quantum computer is orders of magnitude larger than traditional computers, even immensely powerful ones. The power of a quantum computer can be approximately doubled each time only one qubit is added. Relative to classical information processing, quantum computation holds the promise of highly efficient algorithms, providing exponential speedups in a multitude of processes.
Armed with these, Quantum Computing lends itself seamlessly to the financial sector since faster, more accurate, and more secure processing is at the core of how the industry needs to function.
Sample this – Google’s most advanced quantum computer named Sycamore could possibly solve a specific computational task that a traditional supercomputer takes 10,000 years to solve within 3 minutes. With that kind of speed and efficiency in tow, Quantum Computing is expected to produce breakthrough products and services likely to successfully solve very specific business problems. This could well usher in a new heyday, with financial sector holding the odds for being one of the most mightily favoured.
Delineating the Impact – what are the gains?
1. Enhance the efficiency of crucial operational processes in banking like
Financial data encoded with quantum cryptography will be far more secure than other kinds of digital security. Such data cannot be hacked because the data in quantum states is perennially shapeshifting, i.e. constantly changing states and hence cannot be read. In fact, Quantum Computing has the potential to break even the most powerful security encryption of classical computers today. One of the examples to illustrate the use of quantum cryptography is known as a “quantum distributed key system” which promises secure digital communication that cannot be broken, even by a quantum computer itself. Banks such as ABN-AMRO are already starting to integrate this technology.
3. Fraud detection
Quantum technology adeptly extends itself to fraud detection. As per a report in Feb 2019, financial institutions lose between USD 10 billion and 40 billion in revenue a year due to frauds and sub-optimal data management practices. Automation of fraud detection relies on recognizing patterns in data. Thanks to the qubit setup, the data modelling capabilities of quantum computers will prove superior in finding these patterns, performing classifications, and making predictions that are not possible today because of the challenges of complex data structures, thus averting fraud before it happens.
4. Customer targeting and service in banking
Classical computing is limited in its ability to create analytical models that can accurately and promptly cull insights from heaps of data available and target specific products at specific customers in near real-time. This greatly constrains the agility of response to rapidly evolving needs and behaviours of customers today. As per a study in 2019, 25% of small and medium sized financial institutions lose customers due to offerings that don’t prioritize customer experience. Quantum Computing can be quite the gamechanger for customer targeting and predictive modelling. It can also significantly enhance efficiency of critical frontal processes like customer onboarding which can sometimes take as long as 12 weeks to ensure due diligence. Use of quantum technology can turn around efficiencies thus enabling a far more superior and consistent customer experience.
5. Quantum data and transactions
Quantum technology’s ability to handle billions of transactions per second will be highly sought after by financial institutions consistently saddled with huge volumes of transactions. Quantum Computing reduces the likelihood of crashes and data loss. This will significantly accelerate the field of high-frequency trading.
Quantum computers will be able to mine colossal volumes of data almost instantaneously. This could enable the use of AI to make automated decisions using sets of pre-programmed rules. AI is heavily reliant on large chunks of data to be able to learn. Given that Quantum Computing can handle that with incredible efficiency and speed, machines will quickly gather feedback that shortens their learning curve. Operations such as loan and mortgages can be automated, making them faster and efficient with seamless approvals and near zero delays.
6. Risk profiling
Financial services institutions are under increasing pressure to balance risk, hedge positions more effectively, and perform a wider range of stress tests to comply with regulatory requirements. With an ever-evolving regulatory climate, the complexity and cost of compliance is only expected to spiral in the coming years. Currently, Monte Carlo simulations are widely used to analyse the impact of risk and uncertainty in financial models but are highly limited by the scaling of the estimation error. In the face of more sophisticated risk-profiling demands and rising regulatory hurdles, the data-processing capabilities of quantum computers can improve the identification and management of risk and compliance.
7. Onward from here/ The shape of things to come
While the advantages run aplenty, Quantum Computing is still in the inceptive stages. A 2000 qubit quantum computer is expected only after 2025; beyond 2022, some aspects of Quantum Computing may start getting integrated with other cutting-edge technology of the day (such as AI and blockchain) to unravel amazing use cases in consumer experience, cybersecurity etc. The long and short of it is that, we stand at least five years away from Quantum Computing significantly impacting the financial services landscape. However, speculation abounds that Quantum Computing will mature at a velocity unseen by classical computing, and market developments and activities around it in the last couple of years endorse it. Reports say that financial bigwigs like Goldman Sachs, JP Morgan, CBA, Barclays, RBS, Allianz have already started investing in Quantum Computing technology.
The time is ripe for the penny to drop – for enterprises to start exploring investments in Quantum Computing. Those who adopt quantum early can seize major competitive advantages, including the potential to vault ahead of competition and become market leaders.
