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Finance

DIY SOS: FIXING-UP THE FINANCIAL SERVICES HOUSE

By Edwin Abi, CMO, Modulr

 

It has been 11 years since the 2008 financial crisis. And in that time, the ‘financial services house’ has now finally been remodelled; welcome to newly installed marble countertops, wooden floors, and hot coral drapes. The guests are all pleased. But behind closed doors, the plumbing and wiring might not be quite up to scratch.

While there are now cheaper FX transfers, simpler mobile banking and colourful debit cards – even the banks have updated their apps UX – unfortunately, in remodelling the ‘financial services house’, fintech’s have missed the doorbell, the fire alarm, and the plumbing. The infrastructure the house is built on is integral to keep money and services flowing, but its foundations are shaky. 

But this is changing. The next wave of fintech innovation lies in continuing to improve everything the end consumer doesn’t see – KYC/ KYB processes, compliance monitoring, and payment infrastructure, among others. 

 

Installing the wiring 

That’s because for too long, the wiring has been neglected. And we can see this neglect in the simple process of opening a banking app or signing up for a new account. When customers log on to their  banking apps they are presented with a fast and slick IOS – easy to navigate and responsive. However, the truth about what goes on behind that isn’t so slick. In the case of KYC and KYB there are often still a lot of manual processes that need to be checked. This means there’s a mismatch between a digital first business, and a paper trail of spreadsheets, file uploads, and manual processes. 

A truly digital payments infrastructure means any back-end services will be supported by APIs and computers talking to each other. For example, when Revolut opens an account on the front-end, the customer is greeted with a new account page, but they might not be able to move any money until KYC is completed. At the back-end, the server then sends an API to Modulr which generates a sort code and account number straight away. There is no manual intervention needed at all. 

B2B banking might also have had a face lift on the outside, but it’s still a shell of a house behind closed doors. The problem is that in the short term no one has really solved how to onboard sophisticated companies automatically – those with multiple levels of management and large number of employees – with KYB and KYC measures in mind. 

 

Bringing in the contractors 

Maybe all that is needed is a good contractor to fit those wires, and make sure the doorbell and fire alarm are all working. But even though it’s tempting to say that you can fix something by collaborating with someone else, the reality might not be as easy. As much as a third-party vendor which specialises in payments, KYC, or payroll, for example, can be brought in, those making the decisions on the back-office end still need to understand exactly what these ‘contractors’ are actually doing. And there are a number of business courses on payroll, KYC and the likes, to help educate organisations.

But the real reason why these digital-first offerings will really win out in this remodeling contest is because they have the tech aspects sorted. Fintechs specialising in the pipes, for example, will help to dramatically reduce costs to serve, as well help to increase uptimes. So there is a real opportunity for players like Onfido (ID verification), Finastra (risk management) and Modulr (infrastructure) to become the leading fintech providers’ final piece of the puzzle to deliver an unbeatable customer experience – beautiful new drapes, and sufficient heating all through the house. 

This is the real promise of digital. FinTechs have built a beautiful home, and it’s now time to flick on those switches and make sure everything behind closed doors works seamlessly too.

Finance

2020: THE YEAR OPERATIONAL RESILIENCE AND CYBER-RISK TAKE CENTRE STAGE IN FINANCIAL SERVICES

Miles Tappin, VP of EMEA for ThreatConnect, explores how financial providers can build a cyber security strategy that enables operational resilience

 

Financial institutions are operating in a new digital landscape. New disruptive technologies – from Artificial intelligence (AI) to crypto-currencies and big data – have driven change and innovation. In retail banking, new fintech providers have seized the opportunity to offer personalised services and challenge existing providers. For example, Klarna, has successfully disrupted the payments sector and is now established as Europe’s biggest fintech firm. It has quickly emerged as an alternative to credit cards since bursting onto scene, allowing consumers to shop now and pay later with retailers, such as H&M, Ikea and Zara.

To compete with the rising number of fintech providers and fulfil growing consumer expectations, traditional financial institutions are developing robust digital ecosystems that can deliver omnichannel service models. However, it’s becoming clear that the pace of technological change is a double-edged sword. It enables innovation and change but it is also one of the most destructive forces in the financial services ecosystem today.

 

Financial services emerge as a hotbed for cybercriminals

2020 has emerged as a defining year for cybersecurity in the financial services industry. It started with an unprecedented attack against Travelex where hackers successfully took some of the currency providers offline for nearly a month. Then came Coronavirus which sparked a new wave of malware and phishing threats. Research from VMware Carbon Black Cloud revealed that threats against financial institutions have surged by 238% since the start of the pandemic.

The renewed interest from cyber criminals comes at a time when regulators are paying close attention to the resilience of the sector. After a string of IT failures and breaches, financial organisations in the UK have been given a mandate from regulators to improve operational resilience. This means ensuring business models can withstand disruptive events from hackers or adversaries and quickly recover to protect the stability of financial systems.

In December 2019, the UK’s financial regulators published a series of consultation papers outlining their proposed approach to achieving greater operational resilience. The proposals suggested that financial institutions will be required to map out the systems and processes that support business services in order to identify any potential vulnerabilities that would pose a risk to the stability of the UK financial system or the firm’s standing.

 

A mandate for change

Where cybersecurity used to be a classic back-office concern, it’s now a central part of digital strategies and a key pillar of both reputation and customer retention – financial legislation leaves no room for failure. All financial institutions need to ensure they have full visibility of their systems and can detect any potential threats.

The challenge for financial institutions is making the security tools they have purchased separately work together in tandem. Security teams buy a firewall, an email filter, threat intelligence feeds, antivirus software or enhanced endpoint protection, and whatever else they need individually. Each of them does a good job but they don’t talk to each other and valuable time is lost tending to individual systems that become a burden to run. At the same time, running multiple security systems is expensive. The more systems you have, the more highly skilled staff you need to manage them, and they’re few and far between.

 

Improving intelligence sharing across borders and communities

To reduce complexity and simplify decision making, financial organisations need to unify processes and technology to harness the security intelligence that comes from across their own security programmes and external sources to drive down risk. However, no financial institution can tackle the problem alone. Experienced threat actors using advanced techniques are constantly targeting the financial sector. The industry needs to come together as a whole to foster a sense of collaboration and data sharing.

In the same way that financial institutions have introduced open banking to deliver a fairer service to customers, the same needs to apply to security – all parts of the financial ecosystem need to unite and share information to learn from one another and succeed in the fight against adversaries that operate across borders.

By sharing alerts on cyber hazards and risk across financial institutions and with law enforcement, government agencies and other relevant authorities, it’s possible to build industry specific insights into cyber security threats and quickly pivot to gain more information on those specific threats and threat actors. By working together, a picture can be painted on threats coming from all manner of malicious activity, from malware to ransomware, to phishing and software vulnerabilities.

 

Breaking down barriers

Having the right intelligence is not enough to ensure that intelligence is turned into action. Breaking down information and process silos across security teams allows financial organisation to analyse and act on the most pertinent information. Everyone has access to the risk and threats that matter most, and orchestration and automation of response helps overwhelmed security teams prioritise response plans and improve efficiencies in their security programme.

Integrating internal security tools and technologies, while also connecting to external sources of intelligence, creates a single source of intelligence that feeds operations and enables organisations to direct action against the threats that matter most. The outcomes of those actions further feed intelligence, providing the ability to further refine the efficacy of the entire security lifecycle.

This approach provides a continuous feedback loop for the people, processes and technologies that make up the security programme. It allows financial institutions to keep up with threat actors that have consistently adapted their methods to profit at the expense of the financial industry. Something that won’t stop anytime soon.

 

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Finance

GROWTH OF FINANCIAL MARKETS AND TECHNOLOGY

Ashish Jain,CEO, Future FX

 

The economic development of any nation completely depends on its financial structure both in long term and short term. The financial system and its efficiency determines the success of the nation in terms of economic growth.

As most of the sectors are taking advantages of the technology evolved since 1980, financial sector has also transformed immensely.

The Bombay Stock Exchange (BSE), dating back to 1875, started as a broker’s forum under a tree on Dalal Street, and is Asia’s oldest stock exchange. For over a century, registered brokers have made trades happen.

The National Stock Exchange (NSE) came up in 1994 to provide screen-based electronic trading. It gave fibre-optic access to brokers in other cities who could join the trading in the centralized exchange located in Mumbai.

Dematerialization of shares started in the late 1990s and online trading began at the turn of the millennium where investors could buy and sell shares through electronic brokers such as ICICI Direct and Sharekhan.

As more and more elements of the stock market get digitized, it increases its potential to attract a new generation of investors.

Online financial services company Zerodha brought “discount broking” to India in 2010, applying a flat fee of ₹20 on a trade whatever its size. This attracted young investors who could do a trade in less commission. Now, we have all the marketing and trading apps on our phones and we can easily make trades.

The insurance sector has eliminates the role of broker and now anyone can buy insurance through mobile phones. Some such apps are HDFC ERGO insurance, Insure, Caringly Yours, etc.

Trade has always been shaped by technology but the rapid development of digital technologies in recent times has the potential to transform international trade profoundly in the years to come.

From the moment we wake up to check how the markets performed overnight until the time we go back to bed before doing another check of how the market is set to open on the other side of the globe, technology now plays a critical role in everything we do and the way we do things.

For the financial markets, the coming of advanced technology has been the key factor behind the transformation in the way things are done. Technology is also at the core of how companies operate and maintain their competitive edge in this vicious environment.

While forex trading and trading in general used to be the domain of institutional and corporate players, today even retail and private investors consider forex an essential component of their overall portfolio. And this is no doubt due to the ease of access and price transparency offered on the electronic platform.

Nowadays, providers need to have the latest technology all the time. They need to add new and build more features to their platform to attract and retain clients.

Traders are now able to monitor their trades from anywhere as long as there is an internet connection. This gives traders more freedom, mobility and flexibility.

The trading in global markets has thus become easy and convenient like never before.

 

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