Connect with us

Banking

ADAPT OR LOSE – THE BANKING OF 2030

Published

on

BANKING

By Frank Zhou, CEO & Founder of Zeux

 

Fintech, the world over, is rapidly expanding with the global value of fintech deals last year coming in at $53.3 billion. It’s no news that this continued growth can – at least, in part – be attributed to a shift in the financial industry’s mindset to allow and facilitate the integration of digital tools, such as online banking and mobile apps, to help improve the customer experience. But the rate of integration and adoption differs vastly, from continent to continent. So what makes a mindset towards innovation choose ‘caution’ over ‘audacity’ when it comes to the world of fintech, and how are these different approaches shaping the future of the financial landscape? Frank Zhou, CEO and founder of Zeux, shares his insight on the future of banking.

 

Asia is wearing the fintech crown

Financial innovation and the adoption of fintech in Europe has been slow compared to Asia who has been more open to moving away from traditional banking methods. China is the largest alternative lending market holding around 90% of market share, with the US coming in second place.  Together, they dominate 95% of the market. Although the UK is ranked third, the market share is only expected to peak at a value of $4.8bn this year compared to China’s $265.7bn.

BANKING

Frank Zhou

At the head of the pack, Chinese investors are similarly quick to put their weight behind fintech start-ups as they seek to improve the operations of their banks and financial institutions. This forward-thinking approach has brought about the adoption of new-gen technology such as AI and Machine Learning to solve serious finance-relevant issues such as assessing risk and identifying fraud.

The US has demonstrated strong commitment towards adopting new digital technology as well. According to Ryan Battles, EY’s Banking and Capital Markets Lead for the Americas, “banking is finally starting to catch the wave that began with Apple and Amazon raising consumer expectations”.

 

Europe is only catching up with the Silicon Valley mentality

Europe’s fragmented nature – shaped so by its multi-languages, laws and cultures – pushes boundaries in the way of large scale business decisions. And rather than tackle the international markets, an often go-to European approach is to concentrate on developing business within Europe itself.

The Silicon Valley approach of ‘blitzscaling’, a phrase coined by LinkedIn Co-Founder Reid Hoffman, involves scaling at all costs including “doing things that don’t scale” and making deliberate choices without having all of the information—sacrificing efficiency for speed. There are clear risks involved by adopting this method of favouring quick growth on a global scale, but the results can be ground-breaking: think PayPal.

Europe may not have the tech titans that the US or Asia boast, despite having a strong industrial base, but in a ‘hare and tortoise’ style setting, has the potential to become the global fintech frontrunner, because where Europe can truy flex its muscle is in its regulatory prowess when it comes to AI. As with the rollout of GDPR in 2018, Europe wants to be identified as not just a true regulatory superpower but also as a tech superpower. The latest European initiative is to regulate AI through an ‘ecosystem of excellence’ and an ‘ecosystem of trust’. This new legislation will focus on AI applications that are deemed as high risk. Because as we know, Europe is, on the whole, risk averse.

At the same time, the UK itself continues to attract by far the largest share of fintech investment in Europe, with 83% of all European 2019  fintech investment, states Augmentum Fintech.

 

Bright future for the UK: Embracing the power of crypto

With the latest figures predicting traditional British banks could lose a further £8bn of revenue in the next five years, it’s no wonder there’s been an – albeit slow – shift to adopt tech-powered solutions in order to compete against trailblazer challengers such as Monzo and Revolut. Among the line-up of traditional banks that are rolling out new products are Santander and RBS, both of which are evolving the way they facilitate payments and transfers of funds.

Aside from these relatively ‘standard’ innovation developments around payment technology – that are more evolutionary than revolutionary – what else could help the financial sector catch up to its industry counterparts and drive real change? Does crypto really have a place? And how safe is it?

The US is embracing cryptocurrency as a safe digital currency because it trusts the technology behind it. Blockchain technology is an advanced way of logging and protecting data, which is difficult to manipulate or hack. It has the potential to improve security, productivity and customer experience when adopted by businesses in the financial sector. In spite of the bad press it receives, blockchain technology has been recognised as an emerging technology that could transform the banking sector due to the ability to improve trust, provide transparency and potentially lower costs, reduce transaction times and improve cash flow.

At the beginning of the year, even the Bank of England announced that it would consider adopting a bitcoin style digital currency as part of a global group of central banks. And that’s a big step.

Major financial markets around the world are still ahead of European and British banks when it comes to fintech innovation. AI and blockchain technologies are still in their relative infancies, and the pace of change and innovation is only going to gather even more momentum. Those who have made the smart decision to adopt, will reap the benefits that are to come. So, it’s more important than ever for the cautious approach that the British banking industry has demonstrated for so long to be replaced with a new, fresh hunger to harness digital technologies. Not only to guarantee growth, but also to remain competitive in a global market.

Innovation breeds innovation, it breaks through traditional models, and brings new opportunities to the table. The UK’s banks need to be smart with their next move and pull up a chair.

Banking

Augmented automated underwriting and the evolution of the life insurance market

Published

on

By Alby van Wyk, Chief Commercial Officer at Munich Re Automation Solutions

 

It’s almost inevitable. Spend your working life identifying, analysing, quantifying and ascribing monetary value to risk, and you’re likely to have a fairly strong aversion to it. Or more accurately, an aversion to undertaking new endeavours with inadequately understood consequences. The insurance industry is, on any number of levels, the very definition of risk-averse.

And yet, for all the commentary suggesting otherwise, insurance still has an appetite for innovation. If the insurtech sector is any indication, then an interest in and requirement for new solutions is being recognised and slowly addressed.

Declan O’Neill

It may not employ the language of disruption that runs through the wider fintech market, it may be short a few unicorns and unable to boast some of the record-breaking funding rounds, but a quiet tech evolution has been building in insurance nonetheless. Hence the advent of automated underwriting facilitated by more advanced algorithms and data analysis.

Where insurtech does overlap with its more vocal fintech counterparts is in the greater use of artificial intelligence (AI) and machine learning to solve age-old problems around data analysis and interpretation.

It’s about five years or so since AI first became a topic of conversation in insurance. Since then, despite the intensity of the debate, it has often felt like a reality that is always just over the horizon – a destination that kept moving even as more and more efforts were directed towards it.

But recent research suggests that the journeys made so far have not been in vain. We are at a point where embracement of AI is about to step up a gear. The global value of insurance premiums underwritten by AI have reached an estimated $1.3 billion this year, as stated by Juniper Research; but they are expected to top $20 billion in the next five years. As a destination, it is closer and more attainable than ever before.

However, AI is not an island. Its promise of $2.3 billion in global cost savings to be achieved through greater efficiencies and automation of resource-intensive tasks will not be achieved in isolation.

AI remains part of a more complex ecosystem of data gathering and analysis. It can apply new technologies to get the best out of the already established and still-emerging data sources that feature in underwriting offices around the world. It emphatically does not require these existing investments to be ripped out, replaced or downgraded.

It is more helpful therefore to see AI as the differentiating factor in the latest generation of insurance IT: augmented automated underwriting, or AAU for short.

AAU gives underwriters the ability to spot patterns and connections that are, frankly, either invisible to the human eye or which take normal, human-assisted processes unfeasible amounts of time and resource to identify.

Whereas earlier generations of automation were able to pick up the low-hanging fruit of insurance markets – the individuals whose driving history fit into clearly delineated boxes, for example – AAU can take into account all of the rich complexity of the human experience. It can spot the nuances and individualities that populate the life market, for example, and translate those into accurate policies.

That’s good news for both underwriters and their customers. AAU can significantly reduce the need for separate medicals, repeated questions, lengthy decision-making processes, and drastically increase the speed at which a potential insurer can get a quote and cover – while continually improving the way risk is calculated and managed.

It can make sure the decision-making process remains in the hands of underwriters rather than IT departments, enabling them to set and update the rules and parameters as befits their preferred business model. It consequently makes advanced, complex and precise decision-making available to a broader range of underwriting businesses – which is good for those businesses, good for customers and ultimately good for the entire industry.

AAU – augmented automated underwriting – is an example of the realisation of AI’s promise. As such, it’s set to become one of the key talking points and disruptive technologies of the insurance industry. And this time, AAU is both a journey and destination that all progressive insurance organisations need to be considering for their future operations.

 

 

Continue Reading

Banking

ESG in the finance and banking industry – are you ready?

Published

on

By Julian Moffett, CTO BFSI, EDB

 

Environmental, Social and Governance (ESG) has soared towards the top of banking, financial services, and insurance (BFSI) and other boardroom interests. Organisations everywhere know they need to take ESG and greenhouse gas emissions (GHGs) seriously not only because it is the right thing to do for the future of the planet or because it can help attract and retain talent, but also, because failing to do so may pose a risk to the economic value of their businesses and encourage probes by governments, watchdogs and non-execs. However, complying with complex reporting and going the extra mile to actually deliver on the goals of the rules is a challenge in many ways, not the least of which is in achieving the required excellence in data management to underpin strong reporting on ESG.

 

What is ESG? 

Julian Moffett

ESG is an umbrella term that covers a broad gamut of activities. Gartner defines ESG as “…a collection of corporate performance evaluation criteria that assess the robustness of a company’s governance mechanisms and its ability to effectively manage its environmental and social impacts.”

The CFA Institute describes the environmental element as focusing on “the conservation of the natural world” and includes measuring “climate change and carbon emissions,” “air and water pollution” and “biodiversity” among many other measures. Social considers “people and relationships” looking at areas including “customer satisfaction,” and “gender and diversity.” Governance covers “standards for running a company” and analyses factors such as “board composition,” “audit committee structure” and “audit committee structure.”

 

Status of the current regulatory environment

There are many bodies proposing rules to formalise ESG monitoring and seeking to ensure corporate compliance. Some example groups, frameworks and bodies:

  • The Task Force on Climate-related Financial Disclosures (TCFD)
  • Streamlined Energy and Carbon Reporting (SECR)
  • The International Regulatory Strategy Group (ISRG)
  • The Sustainability Finance Disclosure Regulation (SFDR)
  • The International Sustainability Standards Board (ISSB)
  • The Sustainability Accounting Standards Board (SASB)
  • Sustainable Development Goals (SDGs), the Global Reporting Initiative (GRI) support efforts such as the US SEC’s Climate and ESG Task Force.

Financial services organisations are very aware that the current regulatory landscape is far from mature (and will continue changing) both in terms of alignment between bodies and also with regard to when the new rules will come into effect. At the of time of writing:

  • The requirement for Scope 2 disclosures (see below for description) for the Sustainable Finance Disclosure Regulation (SFDR) will likely come into effect in 2023
  • A proposed Corporate Sustainability Reporting Directive (CSRD) should be agreed by the European Parliament this year for implementation in 2024 to report on performance in 2023.
  • Meanwhile, the SEC has just released its proposed rules for climate-related disclosures, which,if passed in legislation, may come into effect as early as year end 2022.

 

Reporting Obligations 

Reporting can cover a wide range of areas covering energy consumption, GHG emissions, water consumption and waste management to health and safety, labour rights, diversity and inclusion to ethical conduct, and even areas such as appropriate executive compensation.

While the regulatory reporting obligations are not yet finalised, the expectation is that compliance may prove to be an onerous task. For example, organisations are under pressure to monitor carbon emissions but even so-called Scope 1 emissions (those that come from owned or controlled emissions) can be hard to track. Factor in Scope 2 (indirect emissions such as purchased power) as well as Scope 3 emissions from up and down value chains, and the reporting task at hand is difficult indeed.

To measure, monitor and manage in addition to staying on the right side of rules, organisations need to have excellent data management fundamentals, strong reporting tools and a new class of applications, which also have the agility to adapt to rapidly changing regulatory demands. Data will be used both to support decarbonisation measures but also to identify where there are disclosure gaps. It was telling that when the SEC issued a press release on its Enforcement Task Force, it specifically referred to data:

“The task force will also coordinate the effective use of Division resources, including through the use of sophisticated data analysis to mine and assess information across registrants, to identify potential violations.”

Having reliable data comply with emerging rules isn’t the only essential requirement for organisations. Institutions need such data to understand where they are in their journey to sustainability, so that they can set sensible targets and track progress against them. Organisations will have to cover the data trifecta of availability, management and transparency. Many organisations may be stuck in the early stages of managing ESG, overly relying on manual processes, spreadsheets and email. But their target should be to get to real-time data insights that are easily visualised, understood and shared. As a foundation, BFSIs need to capture, manage and securely share data reflecting consumption and safety to emissions, financials and data from surveys measuring results against ESG targets. Data emanating from ERP and other back-office systems, performance data from third-party associates, media and social network coverage, spatial/geolocation systems and beyond should also be factored in.

 

Actually reducing GHGs

Organisations are using a wide variety of ways to reduce emissions and improve their footprints from using renewable energy sources to making secondary use of energy; for example, in the case of one university, this is done through capturing data centre heat in hydroponics. For IT, making broader use of multitenancy in cloud computing and hosting services is a popular way to reduce emissions. Not only do these large data centres offer an economy of scale, they also tend to be state of the art in their use of renewables and highly efficient hardware and other infrastructure. Gartner, in an article titled The Data Centre Is Almost Dead, says it expects 80 percent of enterprises will close in-house datacenters by 2025. For me, the jury is out on this one but an interesting one to monitor going forward.

 

Conclusion

We are at the start of a very significant inflection point in regulatory and consumer expectations around ESG. BFSIs should be under no illusion that momentum is building rapidly in terms of having to address strict reporting requirements and implement strategies to reduce GHGs.

However, we also see this as a time of positive change. As the leading provider of Postgres, EDB is excited to help organisations further their ESG goals as the journey unfolds. We are closely monitoring the implications of ESG regulations as they will give rise to a new class of applications and drive adoption of green data centres. We see OSS, including Postgres, as playing a key role in this shift as often the movement to private and public cloud helps accelerate application modernisation and enables displacement of outdated incumbent technology (including database) platforms. As the leading provider of Postgres, EDB is excited to help organisations further their ESG goals as the journey unfolds.

 

Continue Reading

Magazine

Trending

Business3 days ago

How can businesses boost employee experience for finance professionals?

By Martin Schirmer, President, Enterprise Service Management, IFS Over the course of the last year, The Great Resignation has seriously...

Business4 days ago

CBDCs: the key to transform cross-border payments

Dr. Ruth Wandhöfer, Board Director at RTGS.global   If you work in finance, you’ll have been hearing a lot about...

Business4 days ago

Green growth: The unstoppable rise of climate technology investment

With the investment community focusing more and more on renewable technologies, investor interest is at an all-time high. Ian Thomas,...

Business4 days ago

Bolstering know your customer processes as regulation tightens

Nick Payne, banking services, customer advisory, SAS UK & Ireland, discusses how new technologies allow financial services companies to develop rigorous KYC...

Finance4 days ago

The penny has dropped – the finance sector needs Data Governance-as-a-Service

By Michael Queenan, Co-Founder and CEO at Nephos Technologies   In our data-driven world, the amount of data is growing...

Business4 days ago

Seven tips for financial services brands using mail

By Cameron Russell, Head of Marketing at Marketreach   Customer experience (CX) is a powerful differentiator for modern brands. If...

Top 104 days ago

Turn the data landfill into an insight goldmine

Andrew Watson, CTO, MHR Today, businesses have access to a wealth of data, with vast amounts of information created daily....

Business4 days ago

A Culture of Cyber Security Throughout Financial Services Organisations

Michael Cantor, CIO, Park Place Technologies Financial Services organisations have long been a top target for cyber-attacks given both the...

Business6 days ago

Financial Stability Board Gives Full Support to Wide LEI Use in Global Payments

Clare Rowley, Head of Business Operations at the Global Legal Entity Identifier Foundation The strongest recommendation yet by the Financial...

Business6 days ago

On-demand pay: why payroll needs a modern approach

Byline:  Paul Bartlett, CEO, CloudPay   While the world of work has evolved drastically over the last decade, payroll has...

Business6 days ago

 ‘What should real estate investors be doing now – has the market hit rock bottom or is now the time to buy?’

Following many years of housing prices soaring and competition steadily increasing, real estate growth has finally started to slow, likely...

Business7 days ago

Expert Guide for Email Marketing to Improving Your Conversion Rates

If you talk about email marketing campaigns, it would seem like an old-fashioned advertising style. But it is still an...

Banking1 week ago

Augmented automated underwriting and the evolution of the life insurance market

By Alby van Wyk, Chief Commercial Officer at Munich Re Automation Solutions   It’s almost inevitable. Spend your working life...

Banking1 week ago

ESG in the finance and banking industry – are you ready?

By Julian Moffett, CTO BFSI, EDB   Environmental, Social and Governance (ESG) has soared towards the top of banking, financial...

Top 102 weeks ago

An Entrepreneur’s Guide to Investing in Bitcoin

Marcus de Maria, Founder and Chairman of Investment Mastery.   Over recent years, Bitcoin has been steadily growing in popularity...

Business2 weeks ago

Overcoming macroeconomic challenges

By Mike Chambers, formerly CEO of Bacs and a consultant at Access PaySuite.   For businesses offering a subscription-based service, the...

Banking2 weeks ago

How unlocking the potential of tokenised markets can help banks keep pace with the digital economy

Giulia Secco is the Strategic Partnership & Ecosystem Manager at Fnality International.   In the aftermath of the 2008 financial...

Banking2 weeks ago

The role of Artificial intelligence in compliance at banks

Sujata Dasgupta, Global Head – Financial Crime Compliance Advisory, Tata Consultancy Services   There’s not a financial institution across the...

Technology2 weeks ago

Scaling securely in the automation-first era

By Brandon Traffanstedt, Sr. Director, Field Technology Office at CyberArk   Robotic process automation (RPA) has been one of the...

Business2 weeks ago

Putting technology to work on entrepreneur fund-raising

By Simon Glass, CEO, Qodeo   Human relationships are behind the most successful venture capital deals. The chemistry between an...

Trending