Elevates AI and machine learning make it possible to lend safely to subprime borrowers and help them build a #credit history. It lends directly or through #banks which are taking a new look at this market as regulators reduce restrictions.
Financial Technology
Domestic #payments have undergone a complete transformation in recent years and cross-border payments have started to move in this direction. Traditionally, cross-border payments have been subject to various challenges—long and uncertain funds transfer timings, lack of cost transparency and high transfer and conversion costs. Correspondent #banks have cut-off times and deadlines for same-day processing after which payments are processed the next day, so at the point of initiation, exchange rates remain unknown.
Transaction fees might also be deducted from the principal amount, so the beneficiary remains uncertain about the amount which will be credited. Payments need to be routed through many banks before they reach their destination, causing delays and accruing fees. Also, financial institutions have had to devote considerable headcount and efforts to manage liquidity and foreign exchange (FX) risk and to respond to customer enquiries, track status and investigate exceptions.
These long-standing inefficiencies have afforded the opportunities for players including #fintechs to provide innovative and customer-centric services in the #market. UK-based #fintech TransferWise has devised a peer-to-peer solution for money transfer (see Figure 1). Using a matching model where money is redirected to another recipient of an equivalent transfer in the opposite direction, the company avoids costly currency conversion and cross-border fees. This also allows TransferWise to charge between 0.5 and 2.5 percent in fees depending on the currency. Because of this cost benefit, close to two million people use TransferWise to transfer approximately £1 billion from 42 countries each month.
Another FX start-up, Revolut, provides an application that can convert or send money, as well as help users pay for products and services around the world or online. It is like creating a virtual bank account in three different currencies: USD, EUR and GBP. For minimal fees, users can top up their accounts in any of the currencies using a debit or credit card or via bank transfer. Currently, Revolut has nearly one million customers, acquiring 3,000 to 3,500 users every day.
SaxoPayments’s Banking Circle provides opportunities to fintechs, acquirers and payment service providers (PSPs) to offer their merchants the facility to perform immediate cross-border bank transfers and set up local settlement accounts worldwide for their customers quickly and at very low cost. Visa has also come up with a cross-border B2B payments solution called Visa B2B Connect, which uses distributed ledger #technology and leverages Visa’s existing global network of 15,000 financial institutions to create a private permissioned network. It offers speed and visibility of the payment from origination to the receiving end. Other fintechs like CurrencyFair, WorldRemit, Traxpay have also built cost-effective cross-border payment solutions and are rapidly gaining market share from traditional money transfer providers.
However, traditional money transfer providers such as banks cannot afford to keep losing market share to fintechs and new, emerging banking players. The cross-border payments market constitutes a very large portion of payments revenues (close to US$ 24 trillion per year) and is growing more as boundaries disappear for e-commerce.
Banks such as Santander and Fidor have partnered with Ripple to offer a #blockchain-based payment network that can complete cross-border transactions in a matter of seconds. Instead of using fixed correspondents, Ripple implements an automated instant auction for liquidity provision and FX to ensure the best price execution, removing liquidity and settlement risk from the process. Ripple has been able to combine payments messaging with funds settlement, which was previously unavailable for cross-border payments (where messaging is typically separate from the operation of the nostro and vostro accounts used for settlement). Ripple allows customers to keep their money with banks or other financial institutions as opposed to new start-ups and fintechs.
In parallel, the existing cross-border messaging network SWIFT has also launched its new network Global Payments Innovation (GPI). This new solution combines real-time payments tracking and the certainty of same-day settlement for its network banks. It introduces a unique end-to-end transaction reference number (which was missing earlier) to enable unique transaction identification and tracking of the lifecycle of transactions. Now, SWIFT is collaborating with various fintechs to build overlay services on top of the global payments innovation (GPI) platform.
There is a likely emergence of real-time cross-border payments as global banks or other market infrastructure providers begin connecting domestic real-time infrastructures to improve their customer offerings.
Fintechs have taken significant market share from traditional banks in this space and several banks have started to fight back. Banks have begun building new cross-border payment interface and mobile applications, repricing FX and transfer costs, collaborating with fintech players to enhance offerings, and in parallel trying to improve the back-end infrastructure to create a competitive offering. Is this a wake-up call for players who are still in a state of denial?
The post Will fintechs dominate the cross-border payments market? appeared first on Accenture Banking Blog.
SmallBiz #Loans provides #banks and small businesses #technology to help process Small Business Administration (SBA) loans. Its automated advisor acts like a small business CFO, analyzing financials and telling owners if they are a good candidate for the SBA or helps them identify areas to improve.
Financial Technology
Co-Author Abidemi Ogunbowale-Thomas, Digital Senior Manager
The objective? Fostering #cultures where hard-to-find and hard-to-retain engineers will feel included, respected and inspired.
In our experience, too many organisations are still failing to look after their engineers. Why’s that such a mistake? Because to #thrive in the digital era, organisations need the agility that comes from bringing #technology to the decision-making core of the business. And that means radically reassessing the role of engineers within the organisation.
Up to now, engineers have often been taken for granted. They’re the people who get the code written. End of story. That outlook needs to change. As a starting point, #banks need to recognise that engineering is an art form.
Engineers and technologists see themselves as digital artisans, craftspeople who’ve studied hard to acquire and hone their specialist skills. And they expect work that challenges and stimulates them in equal measure. If they don’t get it, their productivity can be critically affected.
The benefits of sharing the bigger business picture can be seen at Facebook: Engineers there get to see the monetary impact, positive or negative, of their work. Adopting a similar approach doesn’t just lead to better solutions; it’ll make your engineers feel like they’re part of something bigger than coding. That will increase their job satisfaction and, as a result, their effectiveness.
By tying these three strands (learning, tools and transparency) together, banks will cultivate skilled, fulfilled engineers who are also business savvy. Cultures like these are the lifeblood of the Netflixes and Googles of this world, where the work engineers do is integral to the broader business strategy. But from what we see, banks are still lagging a long way behind.
We’ve provided a comprehensive to-do list. But what’s the fundamental message? Ultimately banks won’t change their cultures until they commit to bridging the divide between the business and IT. Technologists have to be business-aware. And business people need to understand technology. This is imperative for the future. And guess what? The future’s already started.
The post Building bank cultures where engineers can thrive appeared first on Accenture Banking Blog.
EXCLUSIVE— #Banks are competing on multiple new platforms, with a rising number of competitors, but traditional banks still have the majority of the #consumer’s #trust: at least according to Carey Kolaja, chief product officer for #Citi #Fintech. While fintechs and other FIs continue to nudge their way into the #financial ecosystem, 87% of consumers “still […]
Bank Innovation
Banking is an industry heavily impacted by changing technologies, including #blockchain, the Internet of Things (IoT), and artificial intelligence (AI). Sixty-three percent of the banking respondents to the Accenture Technology Vision 2018 survey say their organizations will make investments in AI over the next year, and 85 percent agree deeper #technology integration into our day-to-day lives is shifting relationships between consumers and enterprises to forms of “partnerships.”
The pace of change has been rapid—perhaps faster than we might have anticipated. Back in 2009, the biggest challenge according to our Accenture Global #Risk Management Study was fragmented, inefficient technology not well suited to risk management needs. Steadily, over the years, technology needs have evolved, focusing more on analytics, big data and intelligent automation. But the pace of change seems to have increased exponentially.
The reasons for change are many and with the digitization of the industry, the opportunity for #banks to innovate is everywhere. Where can risk leaders embrace the challenge?
While there is variation, we found that banks are experimenting with—and adopting—newer technologies at a significant pace.
Our 2017 Global Risk Management Study finds banks making positive progress already. Roughly a third of respondents are starting to use artificial intelligence (AI), robotic process automation (RPA) and machine learning (ML—35 percent, 38 percent and 33 percent, respectively). Risk is in the leading group, as at least one in four banks has begun using these technologies for their risk function (31 percent for AI, 25 percent for RPA and 26 percent for ML). Risk professionals are ambitious; interestingly, these same respondents acknowledge they aren’t using these “New Intelligent Technologies” (New IT) to full potential—signaling that their journey to higher levels of efficiency and cognitive insight is just beginning.
What is driving this? There is not one simple overarching reason. The most basic driver is a similar refrain we hear across all organizations—New IT can help relieve cost pressure. Fifty-five percent of our 2017 study respondents believe that applied intelligent technologies can deliver cost efficiency. Looking at specific technologies, we found that 35 percent of respondents believe that capabilities in big data and analytics can help their risk function address cost pressures to a great extent, while 47 percent believe these capabilities can do so to some extent.
However, the demands on banking risk functions are multifaceted, and a single reason for New IT adoption is, frankly insufficient. Risk functions find themselves processing and analyzing increasingly larger, disparate amounts of data at an ever-increasing pace, to understand an always-growing number of risks and correlations. New IT can catalyze the evolution and sophistication of risk models used by banks, which in turn have the potential to increase both the quality and capabilities of the risk organization.
Cloud is one of the leading technologies we examined in our 2017 Global Risk Management Study, despite it being around for well over a decade. Unsurprisingly, among our banking respondents, 82 percent are using cloud in some form.
Digging deeper, however, this high number is a bit deceiving. Only 18 percent of respondents claim cloud proficiency, and many banks have not yet migrated core systems to the cloud. Over a quarter (26 percent) of respondents are only just beginning to use it, and 38 percent admit they aren’t using it to its full potential.
Now, nearly all the newer technologies we will explore in this blog series can or do reside in the cloud. This makes cloud proficiency essential for banks hoping to rapidly boost their risk management technology infrastructure. Leaders may encounter resistance when pushing for cloud—implementing it can take effort, and upfront expenses may seem costly (even though long-term cost savings can be significant), and changes to the IT operating model may be necessary, too.
Among our study respondents, we see good news. Since a strong majority have at least dabbled in cloud, it’s clear that banks see the potential. In addition, nearly 70 percent of study respondents believe that cloud, collaboration and workflow tools, artificial intelligence and machine learning can help their risk functions alleviate cost pressures to some extent. For banks, now may be the time to rethink the where and how of their cloud strategy and plan, from the perspective of both achieving cost efficiency and driving performance insight.
The promise of innovative technologies holds significant allure. And since banks are at different stages of adoption and maturity, and these technologies are not “one size fits all” solutions, can these technologies really deliver on their promise of significant cost and efficiency gains for each bank?
The rise of digital is a challenge that extends beyond New IT. What do banks need to have in place to be able to reap the benefits of these technologies and the disruptive opportunities being created by a digitized industry?
See my next post for a discussion of coordination #challenges.
The post How ready are banks’ risk teams to meet new IT challenges? appeared first on Accenture Banking Blog.
Three years ago the Technisys survey of #Latin #American #banks found relatively few bankers paying attention to #digital. Now it’s a top concern of every bank board and CEO.
Financial Technology
EXCLUSIVE – For all the talk about appealing to millenials, not that many #banks or FIs out there have figured out #social #media. Sure, most of them (if not all) use various social media platforms such as Twitter, Facebook, or even YouTube to promote their products and services, but it wasn’t easy to find ones […]
Bank Innovation
#More and more consumers are turning to #mobile, which is why #banks are hurrying to make mobile account opening the norm for their financial #customers, according to a study released yesterday by #technology provider Avoka. Mobile account opening is available for around 40% of banking product types in North America and Europe, Avoka’s State of […]
Bank Innovation
What areas of innovation are #banks really focusing on right now? For #Wells Fargo, the ways in which banks deliver information — as well as the technologies used to deliver it — is a key area of focus, at least for those employees working at the bank’s #Digital #Labs facility. “At the moment, we’re really […]
Bank Innovation
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